Funding Fee Explanation

USDT perpetual contracts differ from traditional coin-margined expiry contracts in that they do not have an expiration or delivered date. Therefore, they utilize a "funding cost mechanism" to anchor the contract price to the spot price.

The funding fee is calculated as the position value multiplied by the current funding rate. When the funding rate is positive, long positions pay short positions, and when the funding rate is negative, short positions pay long positions.

The funding fee is collected every 8 hours at 08:00, 16:00, and 24:00 (UTC +8:00) daily.

Users are only required to pay or receive funding fee if they hold positions at the time of collection. If positions are closed before the fee is collected, no funding cost is incurred.

In Cross Margin Mode : When the funding cost is collected, it is directly deducted from the user's realized profit and loss, up to the point where the user's margin ratio equals the maintenance margin ratio + the liquidation fee rate. Any excess is not collected.

In Isolated Margin Mode : When the funding cost is collected, it is first deducted from the user's realized profit and loss. If the realized profit and loss is insufficient, the excess is deducted from the fixed margin of the user's open position, up to the point where the user's margin ratio equals the maintenance margin ratio + the liquidation fee rate. Any excess is not collected.

The actual funding fee that users can receive also depends on the total amount deducted from the counterparty's account by the system.

Calculation of Funding Fee

The calculation of funding cost that users will receive or pay is as follows:

Funding Fee = Net Position Size * Contract Size * Settlement Price * Funding Rate

Where: Net Position Size = Quantity of Long Positions  ( contract quantity ) - Quantity of Short Positions  ( contract quantity )

When the funding rate is greater than 0, users with a positive net position size will pay the funding cost, and users with a negative net position size will receive the funding cost.

When the funding rate is less than 0, users with a positive net position size will receive the funding cost, and users with a negative net position size will pay the funding cost.

Calculation of Funding Rate

The funding rate is designed to ensure that the trading price of perpetual contracts closely follows the reference price of the underlying asset. The funding rate for each period is calculated based on the data from the previous period, and it is determined at the beginning of the current period. The funding rate remains unchanged throughout the period and is applied to settle the funding cost at the end of the period. Additionally, a predicted funding rate for the next period is calculated every minute during the current period, and the last calculated predicted funding rate is used as the funding rate for the next period.

For, the funding rate for the period from 8:00 to 16:00 is calculated based on the data from the previous period (00:00 to 8:00), determined at 8:00, and used for settlement at 16:00. During the period from 8:00 to 16:00, a predicted funding rate for the period from 16:00 to the next day's 00:00 is calculated every minute, and the last calculated predicted funding rate is used as the funding rate for the period from 16:00 to the next day's 00:00.

In extreme market conditions, HKD.com reserves the right to adjust the upper and lower limits of the funding rate and the interval for collecting the funding rate (default every 8 hours). There may be some time delay and error in the actual calculation and collection of fees. The final interpretation right belongs to HKD.com, and HKD.com reserves all rights of interpretation.