Funding Rate

A funding rate is a periodic payment between traders holding long and short positions in a perpetual contract. It is usually not a platform fee. When the perp trades above spot, longs often pay shorts. When it trades below spot, shorts often pay longs.

This payment helps keep a perp close to the spot price. A perp has no expiry date to force that convergence.

Funding is calculated on a schedule set by the venue. The rate changes with the gap between perp and spot prices and with long-versus-short demand. A positive rate usually means longs are paying shorts.

Example: a 0.01% rate may look small, but it repeats while the position stays open. Holding a large leveraged position can make funding a material cost.

Some pool-to-peer venues use an hourly borrow rate instead of a peer funding payment. The rate may rise as more traders use the pool. Either way, the cost continues while the position stays open. Check the venue’s formula and payment schedule before comparing fees.