1. Funding Fee
Funding rates are incurred every 8 hours at UTC-0 00:00 (GMT + 8 08:00), UTC-0 08:00 (GMT + 8 16:00) and UTC-0 16:00 (GMT + 8 24:00). You will only pay or receive funding if you hold a position at the Funding Timestamp.
(When calculating the cost of funds, calculate the marked price of the position value = index price)
The value of your position has nothing to do with leverage. For example, if you hold 100 BTCUSDT contracts, USDT funds will be charged at the nominal value of those contracts, not based on how much margin you have allocated for the position.
When the funding rate is positive, longs pay shorts. When the funding rate is negative, Shorts pay longs the longs.
2. Funding Rate
WBFutures calculates the premium index and interest rate (I) every minute and then calculates it's minute time-weighted average every 8 hours.
Funding rates are calculated based on the interest rate and premium index components every 8 hours, adding+/- 0.05% buffer.
Funding Rate (F) = Premium Index (P) + clamp (Interest Rate (I)-Premium Index (P), 0.05%, -0.05%)
Therefore, if (I-P) is between +/- 0.05%, then F = P + (I-P) = I, funds rate will be equal to the interest rate.
The calculated rate of funds will be used to calculate the value of the trader's position, and then calculate the cost of funds to be paid or collected at the corresponding timestamp.
Funding Rate Limit:
WBFutures caps funding rates to ensure maximum leverage is available. For this we have added two restrictions:
- The absolute funding rate is capped at the initial margin-75% of the 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 shall not change more than 75% of the maintenance margin in the fund interval.
3. Interest Rate and Premium Index
The rate of funds consists of two parts: the interest rate and the premium index. This rate is designed to ensure that the trading price of perpetual contracts underlying the reference price. In this way, contracts are similar to the spot market for margin trading, where buyers and sellers regularly exchange funds rates.
- Interest Rate Components
Each contract traded on WBFutures is consist of two currencies: commodity currency and quote currency. For example BTC/USDT, the base currency is BTC, and the quote currency is USDT. The interest rate is a function of the interest rate between these two currencies:
Interest rate (I) = (denominated interest rate index-based interest rate index) / fund rate interval
Base interest rate index = Interest rate of the base currency
Pricing interest rate index = Borrowing interest rate of the pricing currency
Funding rate interval = 3 (Since and the quote currency funds are generated every 8 hours.)
Note: The current interest rate difference is set to 0.03% per day.
- Components of the Premium Index
Sometimes the price of perpetual contracts is at premium or discount compared to the marked price. In this case, the premium index will be used to raise or lower the next funding rate to bring it in line with current levels of contracts trading. The premium index is calculated as follows:
Premium Index (P) = (Max (0, depth weighted bid price-marked price) - Max (0, mark price - depth weighted sell price)) / spot price + basis of fair price marking.
To learn more about the depth-weighted bid and ask prices, Please refer to the Fair Price Marking.
March 23, 2020