what is the funding fee？
1. What is the perpetual contract funding fee?
The perpetual contract funding fee is a transaction cost designed to maintain a equilibrium between the contract's marker price and the underlying asset's spot index price. Perpetual contracts are a unique type of contract that allows traders to maintain positions indefinitely. The funding fees ensure the contract's market price doesn't diverge significantly from the spot index price, thus ensuring market stability.
2. Why do perpetual contracts require funding fees?
The need for perpetual contract funding fees stems from the imbalance between supply and demand in the market. When most traders in the market hold positions in the same direction (long or short), the market may experience abnormal fluctuations and prices may deviate from spot index prices. In order to maintain the healthy operation of the market, when the contract price deviates from the underlying asset price, the capital fee will motivate traders to take action to realign the contract price with the underlying asset price. This helps prevent excessive fluctuations in market prices, reduce the possibility of market manipulation, and also provides a trading opportunity for contract holders to earn income from funding fees.
3. How is the perpetual contract funding fee calculated?
The calculation of Hibt perpetual contract funding fee is usually based on the following formula: funding fee=position value * current funding rate. When the funding rate is positive, long positions pay short positions; When the funding rate is negative, short positions pay long positions.
4. How is the perpetual contract funding fee charged?
The Hibt fund fee is calculated every 8 hours and collected at 08:00, 16:00, and 24:00 (HKT) every day (the actual collection time will be completed within 1 minute, and each individual contract will be in milliseconds without stopping trading). Only when holding positions during this period, users are required to pay or collect funding fees. If the position is closed before the fee is collected, there is no need to pay any capital fees, and this process is automatic. In addition, funding fees are paid and collected among the holders of the contract.
5. How to view the perpetual contract funding rate?
On the perpetual contract trading page, click on the 'Fund Rate/Countdown' button in the upper right corner to view the 'Current Fund Rate' and 'Predicted Fund Rate'; Click on the top right corner of the contract trading page and select contract information to view the "Fund Rate History"; Attention: When the market fluctuates violently and the long and short positions are imbalanced, the funding rate may be higher. Please pay attention and check.
6. How to check the funding expenses for income/expenses?
During the period of holding a perpetual contract, you can view the historical statement of fund fees for your income or expenses in [Assets] - [Contract Account] - [Statement] - [Statement Type] - [Fund Fees].