Funding Rate
Funding Rate is a payment exchanged directly between long and short position holders. It’s not a fee charged by StandX. When the funding rate is positive, longs pay shorts; when the rate is negative, shorts pay longs. The purpose of the funding mechanism is to keep the price of the perpetual contract converged to the spot market price.
The funding rate is primarily determined by two components: the interest rate and the premium/discount between the perpetual and spot prices.
Interest rates are typically settled on an hourly basis, and specific rates can be configured for each trading pair. As a baseline, the initial interest rate is set to 0.00125% per hour (equivalent to 0.01% per 8-hour funding period). StandX reserves the right to adjust this parameter based on market conditions.
The funding rate is calculated using the following formula:
Funding Rate (F) = Premium Index (P) + clamp(Interest Rate − Premium Index, −0.0005, 0.0005)Where the Premium Index (P) is calculated as:
P = [Max(0, Impact Bid Price − Price Index) − Max(0, Price Index − Impact Ask Price)] / Price IndexDefinitions:
- Impact Bid Price: The average fill price when executing a notional amount of buys.
- Impact Ask Price: The average fill price when executing a notional amount of sells.
The Funding Rate is capped at a maximum of 4% per hour, though each trading pair can be configured with its own, lower cap.
StandX calculates the Premium Index every 5 seconds (12 values per minute), and uses a time-weighted average to derive the final funding rate.
The final funding payment a user receives or pays is:
Funding Payment = Position Notional × Funding Rate