Mark Price, Index Price & Oracles: Pricing Perpetuals Right
Why derivatives exchanges use three different prices — index, mark, and last — how each is calculated, and why liquidations fire on mark price. A pricing primer for operators.
A perpetual contract doesn't have one price — it has three, and confusing them is how exchanges accidentally liquidate healthy positions during a wick. If you're running a derivatives venue, getting index, mark, and last price right is core risk infrastructure, not a detail.
The three prices
| Price | What it is | Used for |
|---|---|---|
| Index price | Volume-weighted spot from multiple exchanges | The "true" reference |
| Mark price | Index + a smoothed basis component | Unrealized PnL & liquidation |
| Last price | The most recent trade on your book | Matching, display |
Index price is a weighted average of spot pulled from several major markets, with weights refreshed roughly every 5 minutes based on recent volume — so if one venue has an outage or flash crash, it doesn't drag the index (WazirX, Bybit).
Mark price blends the index with funding data and a short-term moving average of the basis to filter single-venue noise. Crucially, it's never directly traded — it's a calculated output (leverage.trading).
Last price is just the most recent execution on your perp — it ticks with every trade and can spike far from fair value in a thin market.
Why liquidation uses mark price, not last
This is the whole point. Liquidations trigger on mark price, because a brief spike to a fictional last price shouldn't wipe out otherwise-sound positions (Bybit). In fast markets the drift between last and index can be large — liquidating on last price would let a single manipulative wick cascade the whole book.
Oracles: pricing what isn't on your book
For assets that don't trade natively on your venue — tokenized stocks, RWAs, or on-chain perps — you need an oracle to feed external prices. The same principles apply, magnified: a single-source oracle is a single point of failure, and oracle manipulation is a classic on-chain attack vector. Aggregation and sanity bounds are non-negotiable.
What operators should get right
- Multi-source index with volume weighting and outlier rejection.
- Mark-price smoothing so momentary wicks don't liquidate healthy positions.
- Oracle redundancy for any off-book underlying.
This pricing layer feeds directly into your risk and liquidation engine and funding calculations — it's the foundation both stand on.
The takeaway
Index price is the truth, mark price is the smoothed version you liquidate on, and last price is just the latest trade. Fire liquidations on a well-constructed, multi-source mark price — never on last — and treat oracle design as core risk infrastructure for anything not trading on your own book.
Mechanics are standard across venues; exact formulas and parameters vary. Not trading advice.
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