Funding

Funding Rates are periodic fees exchanged between long and short positions in perpetual futures contracts to align contract prices with the underlying asset's spot price.

Payment Calculation

The funding payment is calculated as: Funding Amount = Nominal Value of Positions × Funding Rate

• Nominal Value of Positions = Mark Price * Size of a Contract

Payment Settlement Rules

• Position Timing:

  • Traders only pay/receive funding if they hold open positions at the exact funding time (e.g., 08:00:00 UTC).

  • Closing a position before settlement exempts traders from funding payments, regardless of direction.

• Settlement Latency:

  • System processing may take up to 1 minute to complete all settlements.

  • New orders placed during settlement may experience high latency (e.g., opening a position at 08:00:59 UTC could still incur funding fees).

Funding Rate Calculation

The funding rate (F) combines two elements:

• Premium Index (P): Measures the deviation between the futures price and spot price.

• Interest Rate (I): A fixed component set by exchanges. In SoDEX, the interest rate is 0.01%.

• Funding Rate (F) = Average Premium Index (P) + clamp(Interest Rate (I) - P, -0.05%, 0.05%)

Calculation Steps

Step 1: Compute Impact Bid/Ask Prices

• Impact Margin Notional (IMN): The notional value tradable with a fixed collateral (e.g., 25,000 USDT for BTC-USDT at 125x leverage).

• Impact Bid Price: Derived from the order book depth required to reach IMN.

• Impact Bid Price = IMN / [(IMN - ∑px-1*qx-1)/px + ∑qx-1]

Step 2: Calculate Premium Index Series

• Updated every 5 seconds (5,760 times per 8-hour interval).

• Premium Index (P) = [Max(0, Impact Bid Price - Index Price) - Max(0, Index Price - Impact Ask Price)] / Index Price

Step 3: Compute Time-Weighted Average Premium Index

• Average Premium Index = (1*P1 + 2*P2 + ... + n*Pn) / (1 + 2 + ... + n)

Step 4: Apply Funding Rate Formula

Funding Rate (F) = Premium Index (P) + clamp(interest rate - Premium Index (P), -0.05%, 0.05%)

Step 5: Capped Funding Rate

Enforce caps/floors to limit extreme rates: Capped Funding Rate = clamp(Funding Rate, Floor, Cap)

• The function clamp (x, min, max) means that if (x < min), then x = min; if (x > max), then x = max; if max ≥ a ≥ min, then return x.

• Floor = 0.75 * Maintenance Margin Ratio

• Cap = 0.75 * Maintenance Margin Ratio