5. How is the price formation?

The mark price is periodically recalculated using either executed transactions or the best Bid and Offer limit (LMT) orders in the order book. When there are no executed transactions, the next mark price is determined based on the best Bid and Offer LMT orders as follows:

Next mark price = Current market price + volume-weighted spread of the best Bid and Offer.

If the volume-weighted spread of the two best Bid and Offer orders is not zero, the mark price will be adjusted up or down by the same percentage periodically. This adjustment continues until the mark price reaches a level that prompts other market participants to buy or sell using market (MKT) orders. These transactions then establish a new mark price.