Why is the Funding Rate important?

BloFin perpetual contracts force the convergence of the market price of perpetual contracts to the underlying asset through a funding fee mechanism.

The funding fee is charged when the user holds a position. As funding rates are periodic payments, if the position is closed before the fee is charged, no funding fee is payable.
Settlement of Funding Fees
Rules

Funding Fees = Nominal Value of Positions * Funding Rate

When the funding rate is positive, long pays short;

When the funding rate is negative, short pays long;

Settlement time

00:00 UTC+8, 08:00 UTC+8, 16:00 UTC+8
Periodic(hours)

Settlement time（UTC）

8

0, 8, 16

4

0, 4, 8, 12, 16, 20

2

0, 2, 4, 6, 8, 10, 12, 14, 16, 18, 20, 22

1

0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23

Calculation of Funding Fees
1) Funding Rate = clamp (Funding Rate (F) , lower, upper)

The upper and lower limits are set by the platform according to risk management.
2) Funding Rate (F) = P + Clamp ( I  P, 0.05%, 0.05%)

Avg. Premium Index P(N) = (1*P_1 + 2*P_2 + 3*P_3 +···+ n*P_N) / (1 + 2 + 3 +···+N)

Interests( I ): The difference is stipulated to be 0.03% per day

Premium Index (P) = [Max(0,Impact Bid Price  Index Price)  Max(0,Index Price  Impact Ask Price)] / Index Price

P_n = (Max(0, bp_n  ip_n)  Max(0, ip_n  ap_n)) / ip_n

Sequence

Impact Bid Price

Impact Ask Price

Index Price

Premium Index

1

bp_1

ap_1

ip_1

(Max(0, bp_1  ip_1)  Max(0, ip_1  ap_1)) / ip_1

2

bp_2

ap_2

ip_2

(Max(0, bp_2  ip_2)  Max(0, ip_2  ap_2)) / ip_2

...

...

...

...

...

n

bp_n

ap_n

ip_n

(Max(0, bp_n  ip_n)  Max(0, ip_n  ap_n)) / ip_n


Impact Bid Price bp : The average fill price to execute the Impact Margin Notional on the Bid Price

Impact Ask Price ap : The average fill price to execute the Impact Margin Notional on the Ask Price
For example，how to calculate the impact bid price：

Assume the following Bidside order book:
Level

Price

Base Quantity

Quote Notional Quantity

Accumulated Quote Notional Quantity

1

p1

q1

multiplier*p1*q1

multiplier*p1*q1

2

p2

q2

multiplier*p2*q2

multiplier*p1*q1+multiplier*p2*q2

3

p3

q3

multiplier*p3*q3

multiplier*p1*q1+multiplier*p2*q2+multiplier*p3*q3

…

…

…

…

…

n

pn

qn

multiplier*pn*qn

multiplier*∑pn*qn


If multiplier *∑px*qx > IMN in Level x and multiplier * ∑px1*qx1 < IMN in Level x1, then we can find the Impact Bid Price from the Level x order book:

Impact bid price = IMN / [(IMNmultiplier *∑p(x1)*q(x1))/px + multiplier * ∑q(x1)]

IMN: Impact Margin Notional

multiplier * ∑q(x1) 为:The amount fully filled at the Level X

IMNmultiplier *∑p(x1)*q(x1))/px 为: The amount partially filled at the Level X


If multiplier * ∑px1*qx1 < IMN in Level x1, then we can find the Impact Ask Price from the Level x order book, where the order book is insufficient:

Impact bid price = multiplier*∑p(x1)*q(x1) / ∑q(x1)

multiplier*∑p(x1)*q(x1): Actual Turnover

∑q(x1): The amount fully filled at the Level X

multiplier is set by the platform according to market conditions


IMN in Level x and multiplier * ∑px1*qx1