OceanEx Perpetual Contract uses a funding rate mechanism to anchor market price to the spot price.
Funding occurs every 8 hours at 04:00 UTC, 12:00 UTC, and 20:00 UTC. You will only pay or receive funding if you hold a position at one of these times. If you close your position prior to the funding exchange then you will not pay or receive funding.
1. The funding you pay or receive is calculated as:
- Funding fees = funding rate * position value
When the Funding Rate is positive, longs pay shorts. When it is negative, shorts pay longs.
2. Funding rate
The fund rate consists of two parts: interest rate and discount. This rate is designed to ensure that the transaction price of the perpetual contract follows the underlying reference price. In this way, perpetual contracts are similar to the spot market for margin trading, where buyers and sellers exchange funds at regular intervals.
The interest rate depends on the currency standard and the interest rate of the currency itself.
- Interest Rate (I) = (Price Index - Base Rate Index) / Fund Rate Interval
Sometimes, the price of a perpetual contract will have a significant premium or discount compared to the marked price. In this case, the premium index will be used to raise or lower the next fund rate to match the current level of perpetual contracts. The premium index for each perpetual contract can be found on the details page of the relevant contract, which is calculated as follows:
- Premium Index (P) = (Max (0, Depth Weighted Bid - Price) - Max (0, Marked Price - Depth Weighted Selling Price) / Spot Price + Reasonable basis for the marked price
After determining the premium index, we set a buffer limit of 0.05% on the fund rate, so:
- Funding rate (F) = premium index (P) + clamp (interest (I) - Premium index (P), 0.05%, -0.05%)
Hence, if (I - P) is within +/-0.05% then F = P + (I - P) = I. In other words, the Funding Rate equals to the Interest Rate.
3. Funding Rate Value
The perpetual contract of OceanEx caps the Funding Rate to ensure that the highest leverage is available. To do this, OceanEx adds two limitations:
- The absolute Funding Rate is capped at 75% of the Initial Margin - Maintenance Margin. If the Initial Margin is 1% and the Maintenance Margin is 0.5%, the maximum Funding Rate will be 75% * (1% - 0.5%)= 0.375%.
- The Funding Rate may not change by more than 75% of the Maintenance Margin between Funding Intervals.
4. Funding Fees
OceanEx does not charge any fees on funding; it is exchanged directly peer-to-peer.