ApolloX's Futures Funding Rates and next funding countdown shown as below:
1. Features of Futures Funding Rates
Futures Funding Rates is primarily used to force convergence of prices between the perpetual contract and the underlying asset.
2. Why the Futures Funding Rates is important?
Traditional futures settle on a monthly or quarterly basis. At settlement, the contract price converges with the spot price, and all open positions expire. Perpetual contracts are widely offered by crypto-derivative exchanges, and it is designed similar to a traditional futures contract. However, perpetual contracts offer a key difference.
Unlike traditional futures, perpetual contracts have no expiration date. For example, traders can hold positions to perpetuity unless he gets liquidated. Therefore, trading perpetual contracts are very similar to spot trading pairs. As such, crypto exchanges created a mechanism to ensure that perpetual contract prices correspond to the index. This is known as Funding Rate.
3. What is Futures Funding Rates?
Funding rates are periodic payments made to either long or short traders, calculated based on the difference between the perpetual contract prices and spot prices. When the market is bullish, the funding rate is positive and tends to rise over time. In these situations, traders who are long on a perpetual contract will pay a funding fee to traders on the opposing side. Conversely, the funding rate will be negative when the market is bearish, where traders who are short on a perpetual contract will pay a funding fee to long traders.
ApolloX will not charge any fees from funding rate transfers as funding fees are transferred directly between traders. ApolloX's funding payments occur every 8 hours at 00:00 UTC; 08:00 UTC and 16:00 UTC. Traders are only liable for funding payments in either direction if they have open positions at the pre-specified funding times. If traders do not have a position, you will not pay or receive any funding.
Please Note: There is a 15-second deviation in the actual funding fee transaction time. For example, when a trader opens a position at 16:00:05 UTC, the funding fee could still apply to the trader (either paying or receiving the funding fee). Therefore, please put attention to your timing to open a position.
4. How to calculate the Funding Amount?
Funding Amount = Nominal Value of Positions × Funding Rate
Nominal Value of Positions = Mark Price x Size of a Contract
5. What determines the Futures Funding Rates?
There are two components to the Futures Funding Rate: the Interest Rate and the Premium. The Premium explains the reason why the price of the perpetual contract will converge with the price of the underlying asset.
ApolloX uses a flat interest rate, with the assumption that holding cash equivalent returns a higher interest than the BTC equivalent. The difference is stipulated to be 0.03% per day by default (0.01% per funding interval since funding occurs every 8 hours) and may change depending on market conditions, such as the Federal Funds Rate.
During high volatility period, there may be a significant difference in price between the perpetual contract and the Mark Price. On such occasions, a Premium Index will be used to enforce price convergence between the two markets. The Premium Index history can be viewed under [Info].
For every contract, it will be calculated separately as below:
- Premium Index (P) = [Max(0, Impact Bid Price - Price Index ) - Max(0, Price Index - Impact Ask Price)] / Price Index
- Impact Bid Price = The average fill price to execute the Impact Margin Notional on the Bid Price
- Impact Ask Price = The average fill price to execute the Impact Margin Notional on the Ask Price
- Price Index is a basket of prices from the major spot market exchanges, weighted by their relative volume.
- The Impact Margin Notional (IMN) for USDT-Margined Contracts is the notional available to trade with 200 USDT worth of margin (price quote in USDT); Impact Margin Notional (IMN) = 200 USDT / Initial margin rate at maximum leverage level