> For the complete documentation index, see [llms.txt](https://docs.txflow.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.txflow.com/perp/funding.md).

# Funding

Funding fees are periodic payments exchanged between long and short positions to keep the perpetual contract price anchored to the spot market.

### Overview

<table><thead><tr><th width="191.85546875">Aspect</th><th width="516.8984375">Detail</th></tr></thead><tbody><tr><td>Settlement Frequency</td><td>Every 1, 4, or 8 hours (depends on the specific contract)</td></tr><tr><td>Who Pays Whom</td><td>Determined by the funding rate at settlement time</td></tr><tr><td>Eligibility</td><td>Only traders holding positions at the exact settlement timestamp pay or receive funding</td></tr></tbody></table>

<table><thead><tr><th width="202.8125">Funding rate</th><th width="264.375">Long Positions</th><th width="277.39453125">Short Positions</th></tr></thead><tbody><tr><td><strong>Positive</strong> (perp > spot)</td><td>Pay funding to shorts</td><td>Receive funding from longs</td></tr><tr><td><strong>Negative</strong> (perp &#x3C; spot)</td><td>Receive funding from shorts</td><td>Pay funding to longs</td></tr></tbody></table>

{% hint style="info" %}
When the perp trades above spot (positive funding), longs pay shorts to incentivize more short selling and pull the price back down. The inverse applies for negative funding.
{% endhint %}

### Funding payment calculation

```
Funding Payments = Position Size * Mark Price * Funding Rate
```

Where:

* `Position Size` = Absolute size in base asset (e.g., BTC, ETH)
* `Mark Price` = Fair value at settlement time (see [Mark Price](/perp/mark-price-and-oracle-price.md))
* `Funding Rate` = Rate at settlement time (see below)

**Sign convention:**

* Positive payment = You pay (debited from margin)
* Negative payment = You receive (credited to margin)

### Funding rate calculation

```
Funding Rate = clamp (F, max, min)
```

Where `clamp()` limits the result to prevent extreme values during volatile periods.

#### Base Funding Rate (F)

```
F = P + clamp (I - P, 0.05%, −0.05%)
```

Where:

* `P` = Average Premium Index
* `I` = Interest Rate

#### Average Premium Index (P)

The Premium Index measures how much TxFlow's perpetual price deviates from the Oracle Price. It is sampled every 5 seconds over an 8-hour window (5,760 samples total):

```
P = Time-Weighted Average of Premium Index over 8 hours
```

Each sample:

```
Premium Index = (Impact Mid Price − Oracle Price) ÷ Oracle Price
```

```
Impact Mid Price = (Impact Bid Price+Impact Ask Price) ÷ 2
```

* **Impact Bid Price** = average price to sell the Impact Margin Notional (execute against bids)
* **Impact Ask Price** = average price to buy the Impact Margin Notional (execute against asks)
* **Impact Margin Notional (IMN)** = `$200 × Max Leverage (Tier 1)`

#### Interest Rate (I)

The Interest Rate represents the cost-of-carry differential between USD and the crypto asset.

```
I = 0.01% per 8-hour period (annualized: ~10.95%)
```

This rate is fixed and reflects standard funding practices on major CEXs.

#### Funding Rate Caps

<table><thead><tr><th width="107.3828125">Cap</th><th width="210.73046875">Value</th><th width="592.44140625">Purpose</th></tr></thead><tbody><tr><td>Maximum</td><td>+0.05% per 1 hours (depends on the specific contract)</td><td>Prevents excessive costs during extreme bullish sentiment</td></tr><tr><td>Minimum</td><td>-0.05% per 1 hours (depends on the specific contract)</td><td>Prevents excessive costs during extreme bearish sentiment</td></tr></tbody></table>

**Example:** If calculated `F = 0.08%`, the actual funding rate applied is capped at `0.05%`.

### Related Pages

<table><thead><tr><th width="247.296875">Pages</th><th>Description</th></tr></thead><tbody><tr><td><a href="/pages/lWdZgI2P4YIODQ7uazsl">Mark Price and Oracle Price</a></td><td>Calculation of Mark Price and Oracle Price</td></tr></tbody></table>