In traditional markets, a position is usually marked to the last trading price (i.e., mark to market), on which unrealised Pnl and liquidation triggering depend. However, unnecessary liquidation may occur if the market is being manipulated, is illiquid or the Mark Price swings significantly relative to its Index Price. KuMEX utilizes a system called Fair Price Marking to avoid the situations above. This system sets the Mark Price of the contract to the Fair Price instead of the last trading price.
Fair Price Marking only affects the liquidation price and unrealised Pnl. Realised Pnl is not affected.
When the index price behaves abnormally, the marking method will be changed temporarily which is similar to simple last trading price marking.