Contract Trading — Funding Fees

Funding fees refer to the fees that traders need to pay or receive within a specific time period. Their main purpose is to ensure that the price of perpetual contracts remains consistent with the spot market price, preventing significant discrepancies between the two. Funding fees are exchanged between long and short positions based on market conditions, typically settled every 8 hours at 16:00 (UTC), 00:00 (UTC), and 08:00 (UTC). Funding fees are generated at settlement, and only users holding positions at the time of settlement are required to pay or receive the funding fees; if a position is closed before settlement, no funding fees need to be paid or received.

 

The funding fee for perpetual contracts is calculated using the following formula:

Where:

Position Value = Contract Quantity * Latest Price

Funding Rate = Average Premium Index + clamp((Interest Rate - Average Premium Index), -0.05%, 0.05%)

Premium Index = [(Contract Best Bid Price + Contract Best Ask Price) / 2 - Spot Index Price] / Spot Index Price, calculated every minute

Average Premium Index = (1 * Premium Index_1 + 2 * Premium Index_2 + 3 * Premium Index_3 + ··· + n * Premium Index_n) / (1 + 2 + 3 + ··· + n)

Premium Index_1: The first premium index data point, calculated over the past N hours, where N is the funding interval, and the number of n data points is N*60

Please note, the funding rate here represents an estimate of the premium index over the past 8 hours. For example, starting from 09:00 UTC, the funding rate calculation will use premium index data from 01:00 UTC to 09:00 UTC (not from 08:00 UTC to 09:00 UTC).

 

Trader A holds a long position of 1 BTC contract on nodexx. At this time, the latest price for the BTCUSDT contract is 100,000 USDT, and the current funding rate is 0.01%.

First, we calculate Trader A’s position value:

Position Value = 1 x 100,000 = 100,000 USDT

Next, we calculate the funding fee that the trader needs to pay:

Funding Fee = 100,000 x 0.01% = 10 USDT

Since the funding rate is positive (0.01%), long position holders must pay this fee to short position holders. Therefore, Trader A must pay a funding fee of 10 USDT, while short position holders with the same contract quantity will receive 10 USDT in funding fees.