About Funding Fees

1. Basic Concepts

CoinEx perpetual contracts ​do not expire​ or require delivery. Instead, the ​funding fee mechanism​ is used to align futures prices with spot prices.

• When the Futures price > Spot price, 📈 it means the market is bullish, and longs pay funding fees to shorts.
• When the Futures price < Spot price, 📉 it means the market is bearish, and shorts pay funding fees to longs.

2. The Importance of Funding Rate

Funding rate is a crucial fee rate in perpetual futures contract trading. Analyzing them helps traders ​estimate holding costs, identify optimal entry/exit points, and avoid unnecessary expenses.

Settlement of Funding Fees

1. Settlement Cycle

Calculated per minute, normally the funding fees are paid or received every 8 hours, at 00:00, 08:00, and 16:00 (UTC) on a daily basis, and the traders will only pay or receive funding fees if they hold a position at the time of settlement. 

In extreme situations, such as high market premiums or large ask-bid spreads, the settlement cycle may be shortened to every 4 or 2 hours.

2. Fee Payment

The payment of funding fees is subject to the funding rate and the directions of positions. Only traders holding positions at settlement time pay or receive fees.

• If the funding rate > 0, longs pay funding fees to shorts.
• If the funding rate < 0, shorts pay funding fees to longs.

Note: Fees are transferred between traders; CoinEx charges no additional fees.

3. Standard Fee Schedule

Key Factors in Funding Rates

1. Market Sentiment: The fees are positive when long positions are more, negative when shorts are more.

2. Arbitrage Transactions: Large price discrepancies attract arbitrageurs, smoothening the rate.

3. Exchange Rules: Calculation methods may differ slightly across platforms.

Recommendations for Beginners

1. Before opening a position, check the current funding rate and estimate costs for the next 8 hours to avoid opening positions when rates are high.

2. Holding: Monitor changes in the funding rate, and consider adjusting the holding period to avoid high fees. It's advisable to check 15 minutes before settlement to decide whether to close the position.

3. Risk Warning: Long-term holdings should consider accumulated fees, and extreme market conditions may significantly increase rates. Use leverage cautiously.

Advanced Knowledge

1. Related Concepts

• Premium Index: Deviation of futures price from spot price.
• Depth-Weighted Price: Weighted average price based on the order book depth.
• Maintenance Margin Rate: Minimum margin to avoid forced liquidation.

2. Calculation Formulas (For Reference Only)

(1) Theoretical Funding Fee: Position size * Mark price * Funding rate

(2) Funding Rate (F) = clamp (Average premium index (P+) + clamp (Interest rate (I) - Average premium index (P+), ±d) , a , b)

• Fixed interest rate (I) = 0
• Premium index (P) = ((Depth-weighted bid price + Depth-weighted ask price)/2 - Spot index price)/Spot index price
• Average premium index (P+) = Moving average of premium index per minute from N hours ago to the current time point.
• Funding rate (F) = clamp (Average premium index (P+) + clamp (Interest rate (I) - Average premium index (P+), ±d) , a , b)

* The variables ”a” and “b” are the upper and lower limits of the funding rate, while “d” is the added buffer coefficient (0.03%). “N” refers to the time interval in hours for collecting funding fees.

(3) Upper and lower limits of funding rates

• Lower limit a = -0.75 * Minimum initial margin ratio
• Upper limit b = 0.75 * Minimum initial margin ratio
• For specific margin ratios, please refer to “CoinEx Futures - Contract Info”

*The BTCUSDC and ETHUSDC markets have a specific setting of ±0.75%

(4) Depth-weighted price

• Margin impact amount = Max position size openable under minimum maintenance margin ratio * 0.01
• The variable "p" is the quantity/lot size of the underlying assets (assume the quantity/lot size of the nth level is “pn”), and "q" is the price of the quote currency.

For linear contracts, depth-weighted price = (p1 * q1 + p2 * q2 + ... + pn * qn) / margin impact amount, where p1 + p2 + ... + pn = margin impact amount (in units of BTC or ETH, etc.)

For inverse contracts, depth-weighted price = margin impact amount / (p1 / q1 + p2 / q2 + ... + pn / qn), where p1 + p2 + ... + pn = margin impact amount (in lots)

3. Dynamic settlement cycle

(1) The settlement cycle of funding fees is 8 hours by default. When the premium is too high, it can be shortened to 4h or 2h.

(2) In the futures market, if the arithmetic average premium index in 1 hour exceeds the upper/lower limit of the funding rate for that market for 4 consecutive hours, the settlement cycle will automatically decrease by one level from the current cycle, down to a minimum of 2-hour intervals, with a cooldown period of 8 hours after each adjustment.

(3) When the funding rate reaches the upper or lower limits set by CoinEx, the settlement interval will be temporarily reduced (for example, from every 8 hours to every 4 hours). During this time, funding fees will be exchanged between traders at the new frequency within an observation period (usually 24 hours). If the rate limit is triggered again during this period, the observation will restart. If it is not triggered within 24 hours, the settlement interval will revert to the previous cycle (from every 4 hours back to every 8 hours) until it returns to the default interval.

4. Note: The above data and indicators are subject to real-time adjustments based on market conditions without further notice.