Perpetual funding is a periodic payment between traders holding long and short positions in a perpetual future. It is set so that the perpetual’s price stays close to the spot price of the asset it tracks.
What is a perpetual future?
A perpetual future is a futures contract with no expiry date. A dated future converges to spot because it settles at expiry. A perpetual never settles, so it needs another way to stay near spot. That mechanism is funding.
Who pays whom?
When the perpetual trades above spot, longs pay shorts. When it trades below spot, shorts pay longs. The payment is a percentage of each position’s notional value, usually measured at the venue’s mark price, and it is exchanged between traders at fixed intervals. On most venues, the venue itself does not keep it.
How is the funding rate set?
Each venue publishes its own formula. Most combine two parts: a premium term, which measures how far the perpetual trades from an index of spot prices, and an interest-rate term. Many venues also cap the rate per interval. Read the venue’s documentation before relying on any rate.
Why does the funding rate change?
Because it follows demand for leverage. When traders crowd into leveraged longs, the perpetual trades above spot and funding rises. When positioning cools or flips, funding falls and can turn negative. Regimes change, sometimes quickly. Past funding is not a forecast.
Can funding be negative?
Yes. When the perpetual trades below spot, funding is negative and shorts pay longs. A position that collects funding in one regime pays it in another.
What does funding mean for a basis trade?
A perpetual basis trade holds the asset and shorts the perpetual. When funding is positive, the short leg receives it. When funding is negative, the short leg pays it. Price risk mostly offsets; funding does not. Funding is the exposure the trade is built to hold. See What is a basis trade?
How does OpenBasis relate to this?
The OpenBasis design sits on the short side of the perpetual, hedged with spot. It receives funding when funding is positive and pays it when funding is negative. The studies test whether that is worth running after all costs, and they are published in full. The practice →