Derivatives · Glossary
Funding rate
A periodic payment between traders in a perpetual futures market.
Definition and explanation
Funding is a mechanism used by many perpetual futures contracts to help keep the contract price near its reference spot price. Depending on the rate and position direction, longs may pay shorts or shorts may pay longs. Funding intervals, calculations and settlement rules vary by venue and contract.
Example
If a contract's funding rate is positive, long positions commonly pay short positions at the funding settlement, subject to that venue's rules.
Educational information only. Trading terms and contract mechanics can vary by venue and market. Verify the rules of the provider you use.