CompliFi supports both fixed maturity and perpetual derivatives. However, the perpetuals design used by CompliFi differs significantly from those often encountered on centralised derivatives exchanges. In particular, it features no funding rate charged to traders, no margin calls or liquidations.
CompliFi perpetuals are structured as a sequence of back-to-back vintages (series) of a fixed maturity derivative, combined with a mechanism that uses the proceeds from settlement of one vintage to automatically purchase a position in the next. Under this model, practically any fixed maturity instrument can be "perpetualised".
When you purchase a perpetual derivative, your position will continue to exists until one of three things happens:
- You sell the position
- Some or all of the position automatically settles, but does not roll over. This happens when the pool, which acts as your counterparty, no longer has sufficient collateral to back the next vintage in the sequence or its risk parameters do not allow the position to continue. Such situations may arise, for instance, due to investors withdrawing liquidity from the protocol. When your position is settled, traders are simply paid the settlement proceeds due to them.
- Value of your derivative position is zero at the time of rollover, and there are no settlement proceeds with which to acquire a position in the new vintage. Please note that, unlike the liquidation mechanism that comes into play at the worst possible time for the trader, CompliFi rollovers treat traders and the pool equally - rollovers occur at specific points in time, no matter who is winning or losing.