Settlement Fee (or trading fee) is the fee paid by takers (traders) to the makers (LPs). Buffer employs a "Dynamic Pricing" mechanism to incentivize or penalize takers, with the aim of maintaining balance in the Open Interest (OI) across various markets and promoting diversification among takers. Dynamic pricing is designed to impose higher fees during periods of market volatility.
Fee is collected at the time when takers open a position and dynamically scales, influenced by trading volume, and payouts. With this mechanism in place payouts can range between a maximum dynamic of 90% to a minimum dynamic of 75% or lower.
Placing Up/Down trades on Buffer incurs a flat fee for interactions with the Buffer keeper to compensate for the gas paid to the underlying blockchain while allowing for a 2x faster 1 Click trading experience. This is a fixed amount used to cover the keeper fee for opening & closing a trade.
Due to the recent gas spikes on Arbitrum, we have implemented the platform fee model as dynamic. The fee is automatically adjusted every 24 hours based on the average cost incurred by the keepers.
100% of the settlement fees is distributed between the makers (aBLP & uBLP LPs), $BFR Stakers.
This fee goes to the Settlement Fee Disbursal (SFD) Contract. SFD contract transfers this fee to the reward distributor contracts of staking. The protocol uses the chainlink keeper to distribute the fee accumulated in the SFD contract to the respective distributors every Wednesday at 12:00 UTC.