Funding rates are a key mechanism in perpetual futures trading that helps keep contract prices aligned with the spot price of the underlying asset. This article explains how funding rates work, how funding rates and fees are calculated, and where to find funding information.

What Is a Funding Rate?

Perpetual futures contracts have no expiration date. Instead, they use a funding mechanism in which traders holding long and short positions periodically pay or receive funding fees. This mechanism helps keep contract prices aligned with spot prices.

The direction of funding payments depends on whether the funding rate is positive or negative:

1. Funding fees are exchanged directly between long and short position holders. LBank does not charge a fee for facilitating these transfers.

2. Funding settlement intervals may vary by trading pair. You can check the funding rate and settlement countdown for each pair on the futures trading page.

How Are Funding Rates Calculated?

Funding rates consist of two components: the interest rate and the premium index.

Interest Rate

1. LBank’s default daily interest rate is 0.03%. For contracts with an eight-hour funding settlement interval, the interest rate per interval is 0.01%.

2. The interest rate may be adjusted based on market conditions. Refer to the information published by LBank for the applicable rate.

Premium Index

1. The premium index measures the difference between the contract price and the spot price. It is calculated as follows:

2. Where:

• Impact Buy Price: The price associated with buying the impact notional amount.

• Impact Sell Price: The price associated with selling the impact notional amount.

• Impact Notional Amount: The notional amount that can be traded with 200 USDT in margin, set at 4,000 USDT by default.

LBank calculates the premium index every second and takes a time-weighted average of the index values over the funding interval before settlement.

Funding Rate Formula

1. The clamp function limits the value of “Interest Rate − Premium Index” to a range of −0.05% to 0.05%.

2. When the difference between the interest rate and the premium index falls within this range, the funding rate equals the interest rate.

Funding Settlement

1. Funding settlement intervals may vary by trading pair. Refer to the information displayed on the futures trading page for the applicable interval.

2. Important: Due to the complexity of the funding settlement process, the actual settlement time may differ by approximately five seconds from the scheduled settlement time shown on the platform. Position changes made during this period are not guaranteed to be reflected in the funding settlement for that interval. LBank will not provide compensation for settlement disputes arising from such discrepancies.

How Are Funding Fees Calculated?

Funding fees are calculated using the position’s notional value and the funding rate:

 

 

Position size is expressed in units of the underlying asset.

Calculation Example

1. Suppose a position has a notional value of 10,000 USDT and the funding rate for the current interval is 0.01%. The funding fee is:

2. Since the funding rate is positive, long and short position holders with the same notional position value would pay or receive funding as follows:

• Long position holder: Pays 1 USDT.

• Short position holder: Receives 1 USDT.

Reminder

Funding rates and settlement intervals may be adjusted. Refer to the information displayed on the trading page and LBank’s latest announcements for the applicable rules. Funding fees affect the cost of holding a position, so monitor funding rates and settlement times and manage your account funds accordingly.

Futures trading involves significant risk. Make sure you understand the relevant rules and risks before trading, and trade within your risk tolerance.