Feature Background / Overview

The funding fee is a mechanism for both long and short parties in perpetual contracts to exchange fees at regular intervals, aiming to keep the contract price close to the spot index price. This article is intended to help you understand common questions such as the definition of funding fees, calculation logic, settlement time, viewing methods, and risk warnings.

Detailed Explanation of Funding Fee

1. What is the funding fee for perpetual contracts?

The funding fee is a fee mechanism in perpetual contracts that is periodically settled between long and short positions. Its purpose is to ensure balance between the contract mark price and the spot index price of the underlying asset.

Unlike delivery contracts, perpetual contracts have no expiration or settlement date, and except in cases of liquidation, traders can hold positions indefinitely. Therefore, to ensure that the price of perpetual contracts corresponds to their underlying market, cryptocurrency trading platforms have created a mechanism called the funding fee.
The main function of the funding fee is to promote convergence between the perpetual contract price and the underlying spot index price. When liquidity is sufficient, trading perpetual contracts is very similar to trading in the spot market.

2. Who needs to pay the funding fee?

In the perpetual contract market, traders holding long or short positions will periodically pay each other funding fees based on the deviation of the market price from the spot price.

The rules for paying funding fees are as follows:

• When the funding rate is positive (funding rate > 0): Longs (users who buy contracts) pay funding fees to shorts.
  The reason longs pay funding fees is because the current market sentiment is bullish, causing the perpetual contract trading price to be higher than the corresponding spot price. This "premium" phenomenon indicates that market participants are generally optimistic and going long, which pushes the contract price away from its proper anchor price.

  To prevent the perpetual contract price from deviating from the spot index price for a long time, when there is a premium in the market, requiring longs to pay funding fees encourages some longs to close their positions or reduce their willingness to go long; at the same time, shorts become more attracted to hold positions due to receiving funding fees, thereby attracting more shorts into the market. This behavior helps ease buying pressure and gradually brings contract prices back in line with spot levels.

• When the funding rate is negative (funding rate < 0): Shorts (users who sell contracts) pay funding fees to longs.
  The reason shorts pay funding fees is because current market sentiment is bearish, causing perpetual contract trading prices to be lower than corresponding spot prices. This "discount" phenomenon indicates that market participants are generally pessimistic and going short, which pushes contract prices away from their proper anchor price. To prevent perpetual contract prices from deviating from spot index prices for a long time, when there is a discount in the market, requiring shorts to pay funding fees encourages some shorts to close positions or reduce their willingness to go short; meanwhile, longs become more attracted to hold positions due to receiving funding fees, thereby attracting more longs into the market. This behavior helps ease selling pressure and gradually brings contract prices back in line with spot levels.

3. Funding Fee Settlement Time and Frequency

Generally, Deepcoin conducts funding fee settlements every 8 hours at 8:00, 16:00, and 24:00 (UTC+8). For trading pairs with high volatility, the settlement interval may be adjusted to every 1, 2, or 4 hours.

Calculation and Display: > Under normal circumstances, Deepcoin’s funding rates are calculated and updated every minute. As refresh mechanisms may vary slightly across different trading pairs, please refer to the real-time data displayed on your interface for accuracy.

Settlement Basis: > During settlement, the system utilizes the most recently calculated funding rate. For instance, if the settlement is scheduled for 16:00 (UTC+8), the funding rate calculated at the 16:00 mark will be applied.

Kind Reminder:

The funding fee settlement is a unified process across the entire platform. The system may require up to 1 minute to complete all trading pairs' funding fee calculations; the specific duration depends on users' position sizes and system load at that time. Therefore, settlement of funding fees may not be completed instantly at the scheduled time (such as 08:00:00 UTC) but may be processed gradually within several seconds afterward.

Since the system cannot guarantee that funding fee settlement for a specific trading pair will be completed at an exact moment, for example, if a trader opens a position at 08:00:59 (UTC), that position may still be included in the current cycle's funding fee settlement, regardless of whether the trader is the payer or receiver.

During the funding fee settlement period, especially within a few seconds close to the settlement time (such as around 08:00), newly submitted orders may experience brief delays. This is because the system is prioritizing the settlement logic of funding fees. It is recommended that traders avoid submitting high-frequency operations at settlement points to ensure optimal order execution experience.

The payment or receipt of funding fees only applies to traders who still hold open positions at the scheduled settlement time. If you have fully closed your position before this time, no funding fees will be incurred. For example, if a trader opens a position at 07:59:59 (UTC) and closes it at 08:00:01 (UTC), and the system completes that period’s funding fee settlement at 08:00:02 (UTC), then this user's position may not participate in this round of funding fee settlement. Please arrange your opening and closing times reasonably according to your own trading strategy.

4. How is the funding fee calculated?

Funding Rate Calculation

Common Formulas for Perpetual Contract Funding Rate

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

To avoid abnormal fluctuations in the funding rate caused by extreme market conditions, Deepcoin applies clamp limitation to the difference of (Interest Rate (I) - Premium Index (P)) within the range of [0.05%, -0.05%]. This mechanism can smooth out rate changes, reduce the impact of extreme rates on position costs, and stabilize contract prices anchoring to the spot index.

Calculation Example (Assume Interest Rate = 0.01%)

Example 1 (Exceeds Lower Limit)

Premium Index = 0.08% ⇒ Interest Rate – Premium Index = 0.01% - 0.08% → clamp is -0.05% → Funding Rate = 0.08% - 0.05% = 0.03%

Example 2 (Within Range)

Premium Index = 0.04% ⇒ Interest Rate – Premium Index = 0.01% - 0.04% → clamp is -0.03% → Funding Rate = 0.04% - 0.03% = 0.01%

Example 3 (Exceeds Upper Limit)

Premium Index = -0.06% ⇒ Interest Rate – Premium Index = +0.06% → clamp is +0.05% → Funding Rate = -0.06% + 0.05% = -0.01%

In other words, as long as (Interest Rate (I) - Premium Index (P)) falls between -0.04% and 0.06%, then F = P + (I - P) = I, which means the funding rate equals the interest rate.

Interest Rate Section (Interest Rate, I)

The platform calculates the theoretical interest rate difference by comparing the lending rates of the base currency and the quote currency.
The calculation formula is as follows:

Interest Rate (I) = (Quote Currency Interest Rate - Base Currency Interest Rate) / Funding Fee Interval

In Deepcoin's USDT Perpetual Pro Contract, the system sets the interest rate to a fixed value by default. Currently, the default interest rate is set at 0.03%.

For example, for BTCUSDT: Funding interval = 24 / funding interval time = 24 / 8 = 3 (assuming funding fees are paid every 8 hours).

Interest rate = (0.03%) / funding interval = (0.03%) / 3 = 0.01%. (Assuming funding fees are paid every 8 hours.)

However, the platform reserves the right to make dynamic adjustments based on market rates (such as the Federal Funds Rate).

Average Premium Index (P)

Step 1: Calculate the Premium Index (P)

Premium Index (P) = ((Best Bid Price + Best Offer Price)/2 - Index Price) / Index Price

If Premium Index > 0: The contract is trading at a premium to the index price (bullish).

If Premium Index < 0: The contract is trading at a discount to the index price (bearish).

Best Bid: The highest price buyers are willing to pay in the order book; represents the strongest immediate buying interest in the market.
Best Offer/Ask: The lowest price sellers are willing to accept in the order book; represents the weakest immediate selling price in the market.

Index Price: Deepcoin forms this by taking a weighted average of prices from multiple mainstream spot platforms, often combined with mechanisms such as outlier removal and update timeout de-weighting, to ensure the reference price's stability and fairness.

Step 2: Calculate Average Premium Index (Time-weighted average of premium index during funding rate period)

Average Premium Index(P) = (1*Premium_Index_1 + 2*Premium_Index_2 + 3*Premium_Index_3 +···+ n*Premium_Index_n) / (1+2+3+···+n)

Deepcoin calculates the premium index (P) every minute, and then computes its weighted average per minute every N* hours. The closer it is to the settlement time, the larger the coefficient of the premium index.

 Taking an 8-hour funding rate interval as an example, each hour corresponds to a 60-minute interval, and the 8-hour period totals 480 intervals (8 * 60). Therefore, the coefficients will be 1, 2, ..., 480. The calculation formula for the average premium index (P) is as follows: (Premium Index _1 * 1 + Premium Index _2 * 2 +... + Premium Index _480 * 480) / (1 + 2 +... + 480).

Funding Rate Upper/Lower Limits for Perpetual Contracts

Deepcoin caps the funding rate to ensure the highest leverage can be used. To achieve this, we have added two restrictions:

Upper limit = 0.75 * (Initial Margin Rate - Maintenance Margin Rate)

Lower limit = -0.75 * (Initial Margin Rate - Maintenance Margin Rate)

Final Funding Rate = clamp (Funding Rate, Lower Limit, Upper Limit)

For USDT Perpetual Contracts, there are two types of funding rate caps:

Using BTCUSDT as an example: if the initial margin is 1% and the maintenance margin is 0.5%, then the funding rate upper and lower limits are as follows

Lower limit = -0.75 * 0.5% = -0.375%

Upper limit = 0.75 * 0.5% = 0.375%

Note: In extreme market conditions, Deepcoin reserves the right to adjust the upper and lower limits of the funding rate.

Funding Fee Calculation

Funding Fee Calculation Formula

Funding Fee = Position Value * Funding Rate

Position Value = Contract Quantity * Contract Size * Latest Mark Price or

Position Value = Coin Quantity * Latest Mark Price

Funding Fee Example

Taking the USDT Perpetual Pro Contract as an example, suppose you hold the following position in the BTCUSDT Perpetual Pro Contract:

Funding fee = 0.001 × 100 × 100,000 × 0.0001 = 1 USDT

Therefore, if you hold a long position, you will pay 1 USDT at the end of the current funding fee settlement period; if you hold a short position, you will receive a funding fee of 1 USDT in the current period.

Taking the Inverse Perpetual Contract as an example, suppose you hold the following position in the BTCUSD contract:

Funding fee = 100 × 100 ÷ 8000 × 0.0001 = 0.000125 BTC

Therefore, if you hold a long position, you will pay 0.000125 BTC at the end of the current funding fee settlement period; if you hold a short position, you will receive 0.000125 BTC as the funding fee in the current period.

5. How to view real-time / historical funding rates and historical funding fees?

View real-time funding rate

PC

Step 1: Open the contract trading page (USDT Perpetual Contract/Coin-margined Contract). At the top of the candlestick chart, you can view the real-time funding rate and the remaining time until the next settlement at "Funding Rate / Time to Settlement"

APP

Step 1: Tap "Trade" below to open the contract trading page (select the contract pair you want to view). You can check the current funding rate for the trading pair below the order book.

View Historical Funding Rates

PC

Step 1: Open the contract trading page (USDT Perpetual Contract/Coin-margined Contract), and click "Contract Info" in the bottom right corner.

Step 2: You can view the settlement details of each trading pair on the funding fee page, including the fee amount for the current period and historical records.

APP

Step 1: Click "Trade" below to open the contract trading page (select the contract trading pair you wish to view)

Step 2: Click the upper right "...", and select "Contract Info" from the menu panel.

Step 3: You can view the settlement details of each trading pair on the funding fee page, including the fee amount for the current period and historical records.

View Historical Funding Fees

PC

Step 1: Log in to your account, click the "Profile Icon" at the top right of the homepage, and you will be redirected to the Account Overview page.

Step 2: In the contract account, select the corresponding account type (USDT Perpetual Pro Contract/Coin-margined Contract/Experience Bonus Account), and click on the right “History”

Step 3: On the transaction history page, you can filter by selecting the first "All" dropdown on the left and choose "Funding Fee" to view the details of funding fees actually paid or received during each period.

APP

Step 1: Log in to your account, click the "Assets" button at the bottom right to go to the assets page, select "Contract Account", choose the corresponding account type (USDT Perpetual Pro Contract/Inversed Perpetual Contract/Experience Bonus Account), and click "History" on the right.

Step 2: On the transaction history page, you can filter by selecting the second "All" dropdown on the left and choosing "Funding Fee" to view the details of funding fees actually paid or received during each period.

6. Frequently Asked Q&A

Customer Support Channels

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