Funding Rate

Funding rate is a rate used to determine periodic payments between participants in the market for perpetual futures.

The funding mechanism helps keep the perpetual contract price connected to the spot price of the underlying asset. When the contract deviates from the spot market, funding can create an economic incentive for traders to adjust their positions.

How funding works

Depending on the funding rate, one side of the market pays the other. Under a common convention, positive funding means long positions pay short positions. Negative funding reverses the payment direction.

Exact rules, intervals, and formulas are determined by each trading venue.

Effect on traders

If a position remains open through multiple funding periods, payments received or paid affect its total financial result. Therefore, the profitability of a perpetual position cannot be evaluated from price movement alone.

Funding is a transfer between market participants and should not automatically be treated as an ordinary exchange trading fee.