Why Is Price Manipulation a Concern for the Final Settlement Price Calculation?
Price manipulation is a concern because a small group of traders could attempt to artificially inflate or depress the spot price at the exact moment of settlement. Since the final settlement price determines the profit or loss on the entire futures contract, manipulating this price could yield substantial, illicit gains.
Exchanges use averaged index prices from multiple sources to make this manipulation attempt prohibitively expensive and difficult.
Glossar
Price Manipulation
Deception ⎊ ⎊ Price manipulation within cryptocurrency, options, and derivatives markets involves intentional actions designed to create artificial movements in the price of an asset, deviating from legitimate supply and demand forces.
Averaged Index Prices
Index ⎊ Averaged Index Prices, within cryptocurrency derivatives, represent a calculated value derived from a series of discrete price observations over a specified period.
Final Settlement Price
Valuation ⎊ The Final Settlement Price in cryptocurrency derivatives represents the agreed-upon value of the underlying asset at contract expiration, crucial for determining payouts in options and futures.
Final Settlement
Resolution ⎊ Final Settlement, within cryptocurrency derivatives and financial markets, signifies the conclusive determination of obligations arising from a contract, typically involving a cash or asset transfer to extinguish all outstanding commitments.