How Funding Fees Work in Perpetual Contracts
At OKX, perpetual futures contracts utilize a funding fee mechanism designed to maintain alignment between the contract's market price and the underlying index price. This system creates a periodic payment flow between long and short position holders:
- Positive Funding Rate: Long position holders pay funding fees to short position holders
- Negative Funding Rate: Short position holders pay funding fees to long position holders
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Key Features:
- Payments occur every 8 hours by default (00:00, 08:00, and 16:00 UTC)
- Fees are calculated in milliseconds without trading interruptions
- Only applies to open positions at the time of fee evaluation
- No platform service charges - purely peer-to-peer transfers
Funding Rate Calculation Framework
Original Funding Rate Formula
Funding Rate = Clamp [MA (Premium Index - Interest Rate), Funding Rate Cap, Funding Rate Floor]
Where:
- Interest Rate = 0% (current setting)
- Premium Index = [(Best Bid + Best Ask)/2 - Index Price] / Index Price
- MA = 8-hour moving average of premium index
Example: The rate at 07:59 UTC uses minute-by-minute premium index data from 00:00-07:59 (480 data points).
Updated Funding Rate Calculation (Three-Phase Implementation)
New Formula:
Funding Rate = clamp [Average Premium Index + clamp (Interest Rate - Average Premium Index, 0.05%, -0.05%), Funding Rate Cap, Funding Rate Floor]
Key Changes:
- Interest Rate = 0.03% / (24/Settlement Interval)
- Impact Bid/Ask Prices introduced
- Weighted moving average calculation
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Impact Price Calculation (BTCUSDT Example)
Impact Bid Price Calculation:
| Order Book Level | Bid Price | Base Amount (BTC) | Calculation |
|---|---|---|---|
| 1 | 90,000 | 0.02 | 90,000 × 0.02 = 1,800 USDT |
| 2 | 89,900 | 0.06 | 89,900 × 0.06 + 1,800 = 7,194 USDT |
| 3 | 89,700 | 0.16 | 89,700 × 0.16 + 7,194 = 21,546 USDT |
Impact Bid Price = 20,000 / (0.02 + 0.06 + 0.14276) = 89,780.8 USDT
Funding Fee Calculation Methods
USDT/USDC-Margined Contracts
Funding Fee = Position Value × Funding Rate
Position Value = Contracts × Contract Size × Multiplier × Mark Price
Example:
10 BTCUSDT long at 60,000 USDT mark price
Position Value = 60,000 × 10 × 0.01 × 1 = 6,000 USDT
Funding Fee = 6,000 × 0.1% = 6 USDT
Coin-Margined Contracts
Funding Fee = Position Value × Funding Rate
Position Value = Contracts × Contract Size × Multiplier / Mark Price
Example:
100 ETHUSD short at 4,000 USD mark price
Position Value = 100 × 10 × 1 / 4,000 = 0.25 ETH
Funding Fee = 0.25 × 0.1% = 0.00025 ETH
Funding Fee Collection & Distribution
| Process | Details |
|---|---|
| Collection | Deducted from isolated margin or cross margin equity. Liquidations may occur if funds are insufficient. |
| Distribution | Added to position margin (isolated) or cross margin equity. |
Frequently Asked Questions
How often are funding fees charged?
Funding fees are typically assessed every 8 hours (00:00, 08:00, and 16:00 UTC), but can be adjusted to 1, 2, or 4-hour intervals depending on market conditions.
Can I avoid paying funding fees?
Yes. Closing your position before the funding fee assessment time means you won't pay or receive funding fees for that period.
What happens if I don't have enough margin for funding fees?
In isolated margin mode, positions may be liquidated. For cross margin, insufficient funds may trigger partial or full liquidation after fee collection.
How are funding fees calculated during volatile markets?
The funding rate cap/floor mechanisms prevent excessive fees during high volatility, while impact prices provide stability in thin markets.
Why did my funding fee payment exceed my liquidation threshold?
Funding fees are collected first, even if this pushes your margin below maintenance levels. Liquidations occur afterward if necessary.
How does the new funding rate calculation improve trading?
The updated formula with impact pricing and interest rate components creates fairer valuations and reduces potential manipulation in illiquid markets.