The USDT perpetual contract has no expiration or delivery, so it requires a "funding fee mechanism" to anchor the contract price to the spot price.
The funding fee = position value * current funding rate, when the funding rate is positive, the long side pays the short side; when the funding rate is negative, the short side pays the long side.
The funding fee is usually charged every 8 hours, at 00:00, 08:00 and 16:00 (UTC) every day. However, Bitunix will adjust the time for funding rate for some trading pairs based on the market condition.
The user is only required to pay or collect the funding fee if the position is held at that moment. If a position is closed before the fee is charged, no funding fee is payable.
In cross position mode: When the funding fee is charged, it will be deducted directly from the user's futures account balance.
In isolated mode, the funding fee will be deducted from futures balance. If the balance is insufficient, it will cancel the open orders to release the fund. If there's not open orders, it will be charged from the position.
The actual amount of fee that the user can receive also depends on the total amount deducted from the counterparty's account by the system.
Calculation of funding fees
The funding fee to be charged or paid by the user is calculated as follows:
Funding fee = net position held * contract par value * settlement price * funding fee rate.
Where, net position = number of long positions held (sheets) - number of short positions held (sheets).
When the funding rate is greater than 0, users with net positions greater than 0 are required to pay the funding fee, and users with net positions less than 0 are charged the funding fee.
When the funding rate is less than 0, users with a net position greater than 0 will be charged a funding fee, and users with a net position less than 0 will be required to pay a funding fee.
Calculation of the funding rate
The funding rate is designed to ensure that the trading price of a perpetual contract closely follows the underlying reference price. The funding rate for each period, calculated from the previous period's data, is determined at the beginning of the period, does not change during the period and is applied to the funding fee settlement at the end of the period. This period will also calculate the projected funding rate for the next period every minute, and the last calculated projected funding rate for this period will be used as the funding rate for the next period.
For example, the funding rate for the period 8:00-16:00 is calculated from the data of the previous period 00:00-8:00, which has been determined at 8:00 and is used when the settlement is made at 16:00. Also, during the period 8:00-16:00, a predicted funding rate is calculated every minute, predicted for the period 16:00-00:00 of the following day, and the last calculated predicted funding rate is used as the funding rate for the period 16:00-00:00 of the following day.