> For the complete documentation index, see [llms.txt](https://social-trade.gitbook.io/social-trade/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://social-trade.gitbook.io/social-trade/protocol-fees.md).

# Protocol fees

<mark style="color:blue;">**Upfront Fees On Spot Trading :**</mark>&#x20;

* A **0.5% fee** is applied on the **collateral** used when opening a trade in **Spot Funds** only.
* Currently, **100%** of this fee is used to **buy back and burn** the **ST** token.
* This fee may be **discounted by 50%** based on the amount of **xST** the trader has staked. See the table below for details.

| xST         | Discount |
| ----------- | -------- |
| ≥ 100       | 3.0%     |
| ≥ 500       | 5.0%     |
| ≥ 2 000     | 7.5%     |
| ≥ 5 000     | 10.0%    |
| ≥ 10 000    | 15.0%    |
| ≥ 20 000    | 20.0%    |
| ≥ 50 000    | 25.0%    |
| ≥  100 000  | 30.0%    |
| ≥ 200 000   | 35.0%    |
| ≥ 400 000   | 40.0%    |
| ≥ 1 000 000 | 45.0%    |
| ≥ 2 000 000 | 50.0%    |

## <mark style="color:blue;">Performance fees</mark>

**Performance Fees**\
Traders can set **performance fees** for their fund at any rate between **0% and 50%**. The way these fees are **calculated** differs depending on whether the fund is **Spot** or **Perpetual**.

### <mark style="color:blue;">Performances fees for PERP funds</mark>

**Performance Fee Structure**\
A performance fee is applied whenever a trade closes in profit.

**Protocol’s Share**\
For every profitable trade, the protocol retains **20%** of the performance fee, which is then fully redistributed to **xST** stakers.

<figure><img src="https://2090316310-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F5TahQZemAcsxanDKPYx8%2Fuploads%2F3FEdfpmHr67e61M1BIJE%2Fsocialtrade-diagram-1.png?alt=media&amp;token=8e350099-3576-433f-9df8-d5d1785ccdec" alt=""><figcaption></figcaption></figure>

Let’s imagine a trading fund with a **Total Value Locked (TVL) of $100,000**. Out of this amount:

* The **trader’s own deposit**: $20,000
* The **combined investors’ deposits**: $80,000

\
When a trade closes in profit, **20%** of those profits are allocated as the **performance fee**. This fee is then split:

* **80%** goes to the **trader**
* **20%** goes to **ST stakers**

The **remaining 80%** of the trade’s total profit (i.e., the portion not taken as the performance fee) is distributed to the **investors**.

#### **Profit Distribution**

#### **Example** Here’s how profits would be allocated when the trader achieves a **100%** profit on a fund with a **$100,000 TVL**—of which the trader contributed $20,000 and investors contributed $80,000.

1. **Trader’s Base Share**
   * The trader owns **20%** of the fund, so they automatically receive **$20,000** of the profits, with **no fees** applied to their own share.
2. **Investors’ Share**
   * The remaining **$80,000** in profits is attributed to the investors. From this, the following split occurs:
     * **Investors** receive **80%** of **$80,000** = **$64,000** (allocated proportionally based on each investor’s stake in the fund).
     * **Performance Fees** (20% of **$80,000**) = **$16,000**.
3. **Performance Fee Breakdown**
   * **Trader** receives **80%** of the performance fees = **$12,800**.
   * **ST Stakers** receive **20%** of the performance fees = **$3,200**.

This transparent **profit distribution** model ensures that **traders**, **investors**, and **ST stakers** all benefit fairly from the fund’s successful trades.

### <mark style="color:blue;">Performances fees for SPOT funds</mark>

**Performance Fees for Spot Funds (High Water Mark Mechanism)**\
In **Spot funds**, performance fees apply only to profits that exceed the **highest previously achieved value** of an investor’s shares—this is the **High Water Mark**. Each investor’s high water mark is set by their share price at the last fee payment. The trader must surpass this share price to earn the next performance fee.

### Example of Performance Fees Distribution for SPOT funds:

1. **Initial Deposit**: Investors deposit a total of **$1,000** into the fund.
2. **First Profit**: The trader grows the fund by **4×**, creating **$3,000** in profits (total fund value of **$4,000**).
3. **Performance Fee (20%)**:
   * **Total Fee**: $600 (20% of $3,000).
   * **Trader’s Share** (80%): $480.
   * **xST Stakers’ Share** (20%): $120.
4. **Subsequent Losses**: After some poor trades, the fund’s value drops back to **$1,000**, wiping out previous gains.
5. **New Gain (3×)**: The trader recovers the fund from **$1,000** to **$3,000**. However, **no new performance fee** is charged because the fund’s value (**$3,000**) is still below the previous high (**$4,000**). The **share price** must exceed that previous **high water mark** for the trader to earn another performance fee.

### <mark style="color:blue;">Fee Discounts for xST holders :</mark>

**Note**: These fee reductions specifically affect the **portion of performance fees** that would otherwise be allocated to the **Protocol**.<br>

| xST         | Discount |
| ----------- | -------- |
| ≥ 100       | 3.0%     |
| ≥ 500       | 5.0%     |
| ≥ 2 000     | 7.5%     |
| ≥ 5 000     | 10.0%    |
| ≥ 10 000    | 15.0%    |
| ≥ 20 000    | 20.0%    |
| ≥ 50 000    | 25.0%    |
| ≥  100 000  | 30.0%    |
| ≥ 200 000   | 35.0%    |
| ≥ 400 000   | 40.0%    |
| ≥ 1 000 000 | 45.0%    |
| ≥ 2 000 000 | 50.0%    |

### <mark style="color:blue;">**Management Fees**</mark>

When setting up a fund, managers can choose to apply a **management fee** ranging from **1% to 5%** of the fund’s assets annually (Assets Under Management, or **AUM**). Half of the fees collected go to the trader, while the other half is used by the protocol to **buy back and burn** **ST** tokens, thereby reducing the total supply.

**Example**\
Consider a fund with a **4%** management fee and an average **$1 million** in AUM over one year. The fund would collect **$40,000** in management fees:

* **$20,000** goes to the **trader**.
* **$20,000** is used by the protocol to **buy back and burn ST tokens**.