Funding

Funding occurs at regular intervals in order to encourage price convergence betweewn the perpetual contract and the underlying index price. Funding is only paid by those with an open position at the time of the funding event, regardless of when during the interval the position was opened. Moreover, the amount of funding paid is based proportionally on the position value (defined as ABS(open contracts * mark price)) at the time of the funding event, regardless of subaccount leverage.

Funding Calculation

The funding rate is composed of an interest component and a premium/discount component.

The premium/discount component is calculated based on the average divergence of the perpetual contract market from the index price.

Specifically, every funding_rate_calculation_interval, a 'snapshot' of the order book is taken by sampling the perpetual contract's impact bid and ask prices. Where impact_bid_price and impact_ask_price are the average execution prices of aggressing impact_bid_quantity and impact_ask_quantity into the order book. From this, we calculate the premium index as:

premium_index = (
  MAX(impact_bid_price - index_price, 0)
  - MAX(index_price - impact_ask_price, 0)
) / index_price

Every funding_interval, the funding rate is calculated as:

premium_index = AVG(premium_index)
funding_rate = premium_index + clamp(interest_rate - premium_index, -clamp, +clamp)

Currently, the interest rate is a fixed 0.01% per day, and clamp is a fixed 0.05%.

This funding is then clamped between the contract-specified minimum/maximum funding rates. The clamped funding rate is then applied to the position value to calculate the funding.

Funding Application

funding = open contracts * index price
    * funding_rate
    * funding_interval / funding_period

Funding is credited or debited from the unsettled balance for every open position, and is net zero across all positions since there are no fees collected on the payments.

Funding is an atomic event from the perspective of exchange participants. During the funding event, note that mark_price == index_price, and only after the event is complete does the mark price get offset by the funding basis.