The primary mechanism to tether the perpetual contract price to the spot price is funding. Funding occurs every 8 hours at 04:00, 12:00, and 20:00 (SGP Time). You will only pay or receive funding if you hold a position at one of these times. If you close your position prior to the funding exchange, then you will not pay or receive funding.
In order to anchor a perpetual contract trading price to the spot price, the funding mechanism is to ensure TruBit Pro's last traded price is always anchored to global standard index prices.
If the funding rate is positive (0.0XX%), the long position holders have to pay the fee to short position holders.
If the funding fee is negative (−0.0XX%), short position holders will have to pay the fee to long position holders.
1. Funding Rate Calculation
Funding = position value * funding rate
When the funding rate is positive, longs pay shorts. Vice versa if it is negative.
Est. Funding Rate = Clamp (MA (((Best Bid + Best Offer) / 2 - Spot Index Price) / Spot Index Price-Interest), a, b)
*Interest Rate currently = 0
*For Perpetual contracts, a and b are the boundary values (currently, they are +/- 0.003). MA is short for Moving Average.
The funding rate is updated every minute. The Est. Funding Rate at 4:00, 12:00, and 20:00 (SGP Time, UTC+8) will be used for funding exchange.
2. Actual Funding Fee
When the funding occurs, we prioritize the fee to be charged from the balance. If the balance is insufficient, the remaining amount will be deducted from the user’s position margin. The funding fee will continue to be charged until the user’s maintenance margin rate is equal to the minimum, then the rest will be ignored.
The amount of funding fee a user may receive also depends on money collected from the other side.
The platform does not charge any fees on funding; it is exchanged directly between traders.
Suppose a trader opened 10,000 contracts long at 8:11 AM Singapore time at $10000.
At 10:20, the trader closes the position, and he/she will not be charged a funding fee.
At 12:00, the trader still holds a position. Suppose the BTC price at that time is $10024 and the Funding Rate is 0.025%. Therefore, the trader will need to pay position value * funding rate = (10000/10024) * 0.025% = 0.00025 BTC as a funding fee to the opposite side (if the funding rate is negative, the short side will pay the long side).