The Funding Rate is a rate set by PinkWallet to maintain the balance between the contract price and the underlying asset price, typically applicable to perpetual contracts. It is a fund exchange mechanism between long and short traders, and the exchange does not charge this fee. It is used to adjust the cost or return of traders holding contracts, keeping the contract price close to the underlying asset price.
Core Functions of Funding Rate
- Funding fees are settled periodically to adjust the contract price and the spot price.
- The positive or negative funding rate determines the direction of fund payment between long and short parties.
- When the price of the perpetual contract deviates from the underlying asset price, the exchange will adjust the funding rate to prompt long or short traders to pay funds in the opposite direction, thereby bringing the contract price back to the underlying asset price.
- When the market is bullish, the funding rate is usually positive and increases over time. At this point, long traders will pay funding fees to short traders.
- Conversely, when the market is bearish, the funding rate is usually negative, and short traders will pay fees to long traders.
- If the funding rate is 0.00%, no funding fee settlement is required between long and short traders.
Calculation of Funding Fee and Funding Rate
Calculation of Funding Rate
Premium Index = [ Max (0, Depth-Weighted Bid Price - Index Price) - Max (0, Index Price - Depth-Weighted Ask Price) ] / Index Price
Funding Rate = Weighted Average of Premium Index + clamp (Overnight Interest - Premium Index, 0.05%, -0.05%)
Final Funding Rate = clamp (8-Hour Average of Funding Rate, fmax, -fmax), where fmax = (Initial Margin - Maintenance Margin) * 75%
Calculation of Funding Fee
Funding Fee = Notional Value of the Position × Funding Rate
Notional Value of the Position = Mark Price × Contract Size (USDT Perpetual Contracts)
Funding rates are settled every 4/8 hours (UTC 0:00, 08:00, 16:00) at the expiration time.
Notes
- The calculation of funding fees does not consider leverage. Regardless of leverage size, it is calculated based on the current position value.
- When the funding rate is positive: Long traders pay funding fees to short traders. The opposite applies when the funding rate is negative.
- PinkWallet settles funding fees three times a day at UTC 0:00, 8:00, and 16:00. The position value is based on the price at these times. If the user does not hold a position at the settlement time, they will not participate in the settlement. (Some trading pairs have a 4-hour funding rate settlement cycle, corresponding to six settlements per day. The funding rate settlement cycle can be searched and viewed on the contract information page.)