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 
Note: The actual fee assessment might span a minute. For example, when a trader opens a position at 00:00:20 UTC+8, the funding fee could still apply to the trader (either collecting or distributing the funding fee) if the fee assessment has yet to end. The funding fee settlement timing may be adjusted in real time according to market conditions.
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

