Perpetual Futures Funding Rate
Funding rates are a mechanism used to keep the price of a perpetual futures in-line with spot prices. They are periodic payments that are transacted between the long or short traders peer-to-peer. Aevo exchange does not charge a fee on the funding.
The funding payments are made every 1 hour.
Funding Rate Calculation
8H Funding Rate = Average Premium Index + Clamp(Interest Rate - Average Premium Index, 0.05%, -0.05%)
Capped 8H Funding Rate = Clamp(8H Funding Rate, Funding Ceiling, Funding Floor)
Capped 1H Funding Rate = Capped 8H Funding Rate / Funding IntervalSummary of Variables for Funding Rate
Interest rate
Fixed to 0.01% for most assets (see exceptions below). This is equivalent to the cost of borrowing spot crypto.
Impact Notional
Fixed to 10,000 USD for most assets (see exceptions below). This is the notional amount used to calculate the average execution price for Impact Bid/Ask Price.
Impact Bid Price
The average execution price of a sell order with Impact Notional when it is executed on the bids.
Impact Ask Price
The average execution price of a buy order with Impact Notional when it is executed on the asks.
Premium Index
The % difference between the Impact Price and Index Price.
Average Premium Index
This is the weighted average of the Premium Index over an hour period, sampled once every 5 seconds.
Funding Interval
The Interval used to divide the resulting funding rate.
Funding ceiling / floor
Describes the maximum and minimum of the funding rate.
Premium Index
Premium Index can be calculated with the formula below:
Premium Index = Max(0, Impact Bid Price − Index Price) − Max(0, Index Price − Impact Ask Price) / Index PriceCalculating Average Premium Index
Premium Index samples are collected every 5 seconds, summing to 720 samples in an hour. Using the Premium Index samples, the Average Premium Index can be calculated with a weighted average.
Average Premium Index (P) = (1*Premium_Index_1 + 2*Premium_Index_2 + 3*Premium_Index_3 +···+ n*Premium_Index_n) / (1+2+3+···+n)Clamp
The clamp function (x, min, max) ensures that if x is less than min, it is set to min; if x is greater than max, it is set to max; and if x is between min and max, it remains unchanged. Similarly, as long as the Premium Index ranges from -0.04% to 0.06%, the Funding Rate will be fixed at 0.01% (the Interest Rate).
Examples of clamping:
Clamp(0.06%, 0.05%, -0.05%) = 0.05%
Clamp(-0.06%, 0.05%, -0.05%) = -0.05%
Clamp(0.01%, 0.05%, -0.05%) = 0.01%Funding Ceiling and Floor
The funding ceiling and floor is a setting specific to the asset. For example, BTC-PERP has a funding cap of 3%/-3%. A clamp function (as described above) is applied onto the funding rate.
Clamp(Funding Rate, Funding Ceiling, Funding Floor)Funding Interval
Funding is paid every hour. However, the calculated funding rate calculated is divided by 8 hours. This is the standard Funding Interval setting. Note: the Funding Interval is applied after the Funding Cap.
For the specific instruments listed below, the Interval is set to 4 hours: HIFI-PERP, NMR-PERP, TRB-PERP, BLZ-PERP. In situations of extreme market volatility, Aevo retains the authority to modify the funding interval of a perpetual contract, deviating from the standard 8-hour interval.
1H Funding Rate = Funding Rate / Funding IntervalFunding Rate Example
Here is an example of the calculation:
A trader is holding a 8 long contracts of BTC-PERP.
Position size = +8
Interest Rate = 0.01% (this is fixed for most contracts, however it may change for more volatile assets)
Index Price = 15000
Impact Bid Price = 15500
Impact Ask Price = 15600First, we have to calculate the Premium Index of the BTC-PERP.
Premium Index = Max(0, Impact Bid Price − Index Price) − Max(0, Index Price − Impact Ask Price) / Index Price
# Substituting in the values:
Premium Index = [Max(0, 15500 − 15000) − Max(0, 15000 − 15600)] / 15000 = 0.0333We find that the Premium Index is 0.0333... (3.33%). For simplicity, we assume that this Premium Index is the Average Premium Index. A reminder on what Average Premium Index is - it is the weighted average of the Premium Index over the span of 1 hour.
Next, we can calculate what the funding rate using the Average Premium Index:
8H Funding Rate = 0.03333 + Clamp(0.01 - 0.03333, 0.0005, -0.0005)
# Performing the clamp on Interest - Average Premium Index
8H Funding Rate = 0.03333 + (-0.0005)
8H Funding Rate = 0.03283Lastly, once we have the 8-hour funding rate, we can apply some system parameters to acquire our 1-hour funding rate.
Capped 8H Funding Rate = Clamp(0.03283, 0.03, -0.03)
# We are limited to the Funding Ceiling
Capped 8H Funding Rate = 0.03
Capped 1H Funding Rate = 0.03 / 8
Capped 1H Funding Rate = 0.00375The trader holding the +8 BTC-PERP position will be charged 0.00375 (or 0.375%) per hour.
To get the USDC value of the funding payment, we need to multiply the funding rate by the index price and position size. The resulting USDC value of the funding will be charged on the account is 450 USDC.
Funding Charged = Capped 1H Funding Rate * Index Price * Position Size
Funding Charged = 0.00375 * 15000 * 8
Funding Charged = 450[DEPRECATED ON 01 AUGUST 2024] Legacy Funding Rate Calculation
The funding rate for every funding period can be calculated as below:
FundingRateForPeriod = (MarkPriceTWAP - IndexPriceTWAP) / IndexPriceTWAP / FundingIntervalHoursThe default setting for FundingIntervalHours is 8 hours, which closely aligns with the approach adopted by centralized perpetual exchanges.
However, for the specific instruments listed below, the current value is set to 4 hours: HIFI-PERP, NMR-PERP, TRB-PERP, BLZ-PERP. In situations of extreme market volatility, Aevo retains the authority to modify the funding interval of a perpetual contract, deviating from the standard 8-hour interval.
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