Funding Fees

Funding is the fee paid to either long or short traders to ensure that the last price is always anchored to the price of the underlying asset on the spot market.

Funding Fees

Funding fees will be exchanged between long and short position holders every 1 hour.

Please note that the funding rate will fluctuate in real time every 1 hour. If the funding rate is positive upon settlement, long positions holders will pay the funding fees to short position holders. Similarly, when the funding rate is negative, short positive holders will pay long position holders.

Only traders who hold positions at the time of settlement will pay or receive funding fees. Likewise, traders who do not hold any positions when at the time of funding payment settlement will neither pay nor receive any funding fees.

Your position value at the timestamp when funding is settled will be used to derive your funding fees.

Funding Fees = Position Value × Oracle Price × Funding Rate

The funding rate is calculated every hour. For example:

• The funding rate between 10AM UTC and 11AM UTC, and will be exchanged at 11AM UTC;

• The funding rate between 2PM UTC and 3PM UTC, and will be exchanged at 3PM UTC

Funding Rate Calculations

The funding rate is calculated based on Interest Rate (I) and Premium Index (P). Both factors are updated every minute, and an N*-Hour Time-Weighted-Average-Price (TWAP) over the series of minute rates is performed. The Funding Rate is next calculated with the N*-Hour Interest Rate component and the N*-Hour premium / discount component. A +/−0.05% dampener is added.

• N = Funding Time interval. Since funding occurs once per hour, N = 1.

• Funding Rate (F) = P + clamp * (I - P, 0.05%, -0.05%)

This means that if (I - P) is within +/-0.05%, the funding rate is equivalent to the interest rate. The resulting funding rate is used to determine the position value, and correspondingly, the funding fees to be paid by long and short position holders.

Taking BTCUSDT contract as an example, where BTC is the underlying asset and USDT as the settlement asset. According to the formula above, the interest rate would be equivalent to the difference in interest between both assets.

Interest Rate

• Interest Rate (I) = (USDT Interest - Underlying Asset Interest) / Funding Rate Interval

  • USDT Interest = The interest rate for borrowing the settlement currency, in this case USDT

  • Underlying Asset Interest = The interest rate for borrowing the base currency

  • Funding Rate Interval = 24/Funding Time Interval

Using BTCUSDT as an example, if USDT interest rate is 0.06%, BTC interest rate is 0.03%, and the funding rate interval is 24:

• Interest Rate = (0.06-0.03) / 24 = 0.00125%.

Premium Index

Traders can enjoy discounts from the oracle price with the utilization of a Premium Index — this is used to raise or lower the next funding rate so that it aligns with the level of the contract trade.

• Premium Index (P) = ( Max ( 0 , Impact Bid Price - Oracle Price) - Max ( 0 , Oracle Price - Impact Ask Price)) / Index Price + Funding Rate of Current Interval

  • Impact Bid Price = The average fill price to execute the Impact Margin Notional on the Bid side

  • Impact Ask Price = The average fill price to execute the Impact Margin Notional on the Ask side

Impact Margin Notional is the notion available to trade based on a certain amount of margin and indicates how deep in the order book to measure either the Impact Bid or Ask Price.Funding fees will be exchanged between long and short position holders every 1 hour. Please note that the funding rate will fluctuate in real time every 1 hour. If the funding rate is positive upon settlement, long position holders will pay short position holders. If the funding rate is negative, short position holders will pay long position holders. Your position value at the timestamp when funding is settled will be used to derive your funding fees. Funding Fees = Position Size * Index Price * Funding Rate