A fundamental aspect of perpetual contracts is the funding rate mechanism: Periodic payment between traders that helps keep the Mark Price closely aligned with the Index Price of the asset.
What Are Funding Rates?
The funding rate is a periodic fee exchanged between long and short traders to keep the perpetual contract Mark Price aligned with the underlying Index Price. As a core mechanism for price alignment, the funding rate is what makes perpetual futures unique and allow them to function without expiry.
Depending on the funding rate, longs pay shorts or shorts pay longs, at fixed intervals set by the exchange.
Why the Funding Rate Exists
Funding payments act as a mechanism to keep the perpetual futures price (Mark Price) near its spot price (Index Price): When the Mark Price trades above spot price, longs pay shorts. When the Mark Price trades below spot price, shorts pay longs.
Continuous funding is what pulls perpetual prices back towards the index over time.
Positive Funding Rate: Longs pay shorts. This adds a small cost to long positions, pressuring Mark Prices lower.
Near-Zero Funding Rate: Minimal or no transfer. Mark Prices stay close to the Index Price with little directional incentive.
Negative Funding Rate: Shorts pay longs. This incentivizes long positions, pressuring Mark Prices higher.
Funding Calculation Window
The funding window on Omni is variable and ranges from 1 hour to 8 hours. The calculation window is designed to match major centralized exchanges to ensure consistency:
If the market exists on Bybit, the calculation window will match Bybit.
Else, if the market exists on Binance, the calculation window will match Binance.
Otherwise, the calculation window is 1 hour.
For more information on this, visit the Funding Rates on the Variational docs.
Tracking Funding Payments
To monitor your funding payments, navigate to the Portfolio page and select the Funding History tab.
This provides a detailed overview of amounts, assets, and timestamps for all transfers.
For more information, refer to Tracking Funding Payments.
Holding an open position over a longer period of time means accumulating funding payments. Funding rates can become a meaningful cost that is easy to underestimate over longer holds. Make checking funding payments a frequent part of your trading habits.