Fund Rate

Regular collection of fund fees is a common way for exchanges to deal with perpetual contract transactions. Its purpose is to converge the difference between the marked price and the index price, so that the trader's transaction price is as close to the real market price as possible.

The perpetual agreement uses the FTX funding rate calculation method, the specific formula is as follows

Funding Fee = Position Position * Funding Rate Funding Fee = Position Position ∗ Funding Rate

The method of calculating the funding rate in this formula: first subtract the TWAP of the index price from the hourly TWAP of the marked price, and then divide the result by 24.

Funding rate = {TWAP{mark}-TWAP{index} \over 24} Funding rate=24TWAP mark​−TWAP index​​

We use Chainlink as the index price feed source, because Chainlink is currently one of the most widely used and most recognized oracles in the market.

If the funding rate is positive, it means that a trader holding a long position has to pay a funding fee to a trader holding a short position, and vice versa. The settlement and payment time of the fund fee is at the end of each hour, which is similar to the settlement and payment of fund fee once a day in our common futures contract.