What is perpetuals funding?
Funding is a payment made between long and short perpetual position holders. Our funding mechanism is designed to improve the correlation between each of our perpetual futures markets and their Underlying Markets. You will either receive or pay funding depending on your open positions at the end of each hour.
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If the perpetual futures contract is trading at a premium, i.e., when the Mark Price is higher than the Index Price, long positions holders pay the Funding Amount quoted in the Settlement Asset to short position holders.
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Conversely, if the perpetual futures is trading at a discount, i.e., when the Mark Price is lower than the Index Price, short positions holders pay the Funding Amount to long position holders.
How to calculate funding?
The Funding Amount is determined by the funding rate multiplied by the Notional Value of your position and the side of the position (long or short). A positive Funding Amount is receivable by you (i.e. increases your account value) and a negative Funding Amount is payable (i.e. decreases your account value). Each of your positions will have its own separate Funding Amount but those denominated in the same settlement asset can be netted together to determine a single total Funding Amount for that asset.
Funding Amount (of a position)
= -Funding rate x Notional Value of position in Settlement Asset, if you are long
= Funding rate x Notional Value of position in Settlement Asset, if you are short
What is funding rate?
The funding rate, calculated on an hourly basis, is the relative excess of Mark Price over the Index Price. The main purpose of funding rate is to align the prices of perpetual futures contracts with the Underlying Market and incentivize market equilibrium.
Funding rate = max(-1%, min((Mark Price - Index Price) / Index Price, 1%)) / 8
In a positive funding rate, long position holders pay funding to short position holders. A negative funding rate means short position holders pay funding to long position holders.
How is funding settled?
The Bullish settlement mechanism that occurs every 1 hour is designed for mark-to-market profits or losses and funding amounts to be debited or credited to your accounts.
Where can I view the funding rate?
Indicative funding rates are shown at the top of the Trade screen when viewing a perpetuals market. Note that the indicative value uses live prices and can vary considerably over the funding cycle. The funding rate that will actually be used at the end of the hour will depend on the Mark Price and Index Price at that time, both of which cannot be known in advance. The indicative funding rate is also available over API.