What is the funding rate?

What is Funding Rate?

Funding rate is a fee periodically exchanged between long and short position holders, mainly used to narrow the price difference between perpetual contracts and underlying assets. The purpose of funding rate is to incentivize traders to hold positions that can bring contract prices closer to spot prices.

Please note that BiyaPay only facilitates the fund exchange between long and short position holders and does not charge any service fees. In addition, funding rate can also serve as an indicator of market sentiment:

Positive funding rate usually indicates that longs are stronger in the market.

Negative funding rate indicates that shorts are stronger.

Funding Rate Collection Ratio and Settlement Time

The funding rate collection ratio is not fixed and will be determined based on market conditions.

Funding fees are usually settled every 4 or 8 hours. Settlement times are 04:00, 08:00, 12:00, 16:00, 20:00, and 24:00 Hong Kong time. Only when traders hold positions at the funding fee settlement time will they be charged or paid the corresponding funding fees. If no positions are held at the settlement time, no funding fees will be generated.

How to check funding rate on the App:

You can view the specific funding rate and settlement time in the top right corner of the contract 【Trade】 page.

How to check funding rate on the Web:

1. Click 【More】 at the top of the webpage - 【Fee Center】

2. Click 【Contract】 - 【Funding Rate】 to view digital currency contract funding rates

Funding Fee Payment and Collection Direction

1. When the funding rate > 0: Long positions: Pay funding fees. Short positions: Receive funding fees.

2. When the funding rate < 0: Long positions: Receive funding fees. Short positions: Pay funding fees.

In other words: When the funding rate is positive, long positions pay short positions; When the funding rate is negative, short positions pay long positions.

Funding Rate Calculation

Currently, BiyaPay only supports U-margined contracts.

U-margined contract funding rate = Notional value × Rate
Notional value = Contract quantity × Mark price

Funding Rate Arbitrage

Funding rate arbitrage is a delta-neutral strategy that allows traders to hold opposite positions in the spot and contract markets, thereby achieving hedging and risk-avoidance effects. Through funding rate arbitrage, traders can offset losses caused by price fluctuations in the contract market with gains in the spot market (or vice versa). This strategy allows traders to earn funding fees without closing positions.