What are funding payments on the Futures Exchange?

This information comes directly from Nexo's help center

Trading on the Futures Exchange comes with periodic funding payments between participants who hold open positions on the Futures market. These payments are based upon the current funding rate. Depending on your position and whether the funding rate is positive or negative, you will either receive funding or pay it to other traders.

The purpose of funding payments is to reduce the difference between the price of the perpetual futures contract and the underlying spot price.

The current funding rate (underlined in red) is displayed to the right from the selected perpetual contract and its price on the Futures Exchange:


It represents the rate of the latest settlement. Keep in mind that the funding rate is not fixed due to the fluctuating nature of the market.

On Nexo Pro, the funding rate is recalculated every 8 hours (00:00 PM UTC, 08:00 AM UTC, and 04:00 PM UTC). The countdown (underlined in blue) shows the time left until the next funding settlement. The funding fee will be applied up to 5 minutes after the funding payment execution.

When the funding rate is positive, traders who hold long positions pay traders who hold short positions. On the other hand, when it is negative, shorts pay longs.

In the image above, the perpetual contract is BTCUSDT and its price is 23,865.40 USDT. The funding rate is -0.0018% (negative). As the funding rate is negative, if you hold a short position, you will have to pay funding to the traders with long positions. And vice versa, if your open position is long, you will receive funding from the traders who opened short positions.

Source: What are funding payments on the Futures Exchange?
August 23, 2022
Was this article helpful?

Leave a Reply

Your email address will not be published. Required fields are marked *