It's totally normal for there to be a price difference between futures and spot when a new coin launches. Usually, the premium index will show some deviation. For example, when BARD launched, the premium index was at -9%. In this case, even if you multiply it by the 'settlement multiplier' N/8, it would still fall outside the ±2% range and get restricted to -2%. But this kind of price difference is mainly caused by the new coin launch and will naturally be arbitraged back to parity by users soon. This probably isn’t the type of case this algorithm is targeting. The algorithm is likely designed to increase the cost for malicious market-making teams that manipulate the premium index to deviate significantly over the long term by controlling spot supply.