Funding

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

Overview

Aspect	Detail
Settlement Frequency	Every 1, 4, or 8 hours (depends on the specific contract)
Who Pays Whom	Determined by the funding rate at settlement time
Eligibility	Only traders holding positions at the exact settlement timestamp pay or receive funding

Funding rate	Long Positions	Short Positions
Positive (perp > spot)	Pay funding to shorts	Receive funding from longs
Negative (perp < spot)	Receive funding from shorts	Pay funding to longs

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.

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)

• 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

Cap	Value	Purpose
Maximum	+0.05% per 1 hours (depends on the specific contract)	Prevents excessive costs during extreme bullish sentiment
Minimum	-0.05% per 1 hours (depends on the specific contract)	Prevents excessive costs during extreme bearish sentiment

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

Related Pages

Pages	Description
Mark Price and Oracle Price	Calculation of Mark Price and Oracle Price