In the world of perpetual futures trading, understanding how market forces are balanced is essential. One of the most critical mechanisms ensuring price alignment between perpetual contracts and their underlying assets is the funding rate. At OKX, this system plays a vital role in maintaining market stability and fairness.
The funding rate mechanism ensures that the market price of a perpetual futures contract remains closely aligned with its underlying index price. Unlike traditional futures, perpetual contracts do not have an expiration date—making this alignment even more important to prevent prolonged price divergence.
👉 Discover how funding rates can influence your trading strategy and optimize returns
How Funding Rates Work
When the funding rate is positive, long-position holders (buyers) pay a fee to short-position holders (sellers). Conversely, when the funding rate is negative, short-position holders pay longs.
It’s important to note that OKX does not charge any service fees on funding payments. The platform simply facilitates the transfer of funds between traders based on their open positions at the time of funding settlement.
Funding Payment Schedule
Funding is typically settled every 8 hours at 07:00, 15:00, and 23:00 Vietnam time (UTC+7), unless otherwise specified (e.g., some contracts may settle every 1, 2, or 4 hours).
- Each perpetual futures contract undergoes a funding evaluation within milliseconds.
- Trading operations remain uninterrupted during this process.
- You are responsible for paying or receiving funding only if you hold an open position at the exact moment of assessment.
- If you close your position before the funding timestamp, no fees apply.
- In cases where a contract is delisted before funding occurs, the current funding cycle is voided.
While the calculation happens almost instantly, the actual evaluation window can last up to one minute. For example, if you open a position at 00:00:20 UTC, you may still be subject to funding collection or distribution if the system has not yet completed its assessment.
Market conditions may also lead to adjustments in the timing of funding settlements.
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Funding Rate Calculation
Initial Funding Rate Formula
The original method used to calculate the funding rate is:
Funding Rate = Clamp[MA(Price Gap Index – Interest Rate), Max Funding Rate, Min Funding Rate]Where:
- Interest Rate = 0
- Price Gap Index = [(Best Bid + Best Ask)/2 – Index Price] / Index Price
MA (Moving Average) refers to the average price gap over the past 8 hours
- Example: MA at 07:59 uses data from each minute between 00:00 and 07:59 (n = 480)
The most recently calculated funding rate is applied during settlement
- E.g., a funding assessment at 16:00 uses the rate computed at 15:59
This model ensures that extreme values are capped using upper and lower limits (floor and ceiling rates), preventing volatility from distorting the mechanism.
Updated Funding Rate Logic
To improve trading experience and responsiveness, OKX has rolled out an enhanced calculation model in phases. The new formula offers greater accuracy by incorporating weighted averages and dynamic adjustments.
Funding Rate = Clamp[Average Price Gap + Clamp(Interest Rate – Average Price Gap, 0.05%, -0.05%), Max Funding Rate, Min Funding Rate]Key components:
Interest Rate = 0.03% / (24 / Settlement Interval)
- For an 8-hour settlement (like BTCUSDT), interest per period = 0.01%
Average Price Gap uses a weighted moving average over the latest settlement cycle
- Example: At time Tn, it's calculated as
(1×T1 + 2×T2 + ... + n×Tn)/(1+2+...+n)
- Example: At time Tn, it's calculated as
Impact Bid/Ask Prices replace simple best bid/ask levels
- Reflects average execution price for a defined impact size
- Impact Size = 200 × Maximum Allowed Leverage for the contract
👉 Learn how updated funding logic improves market fairness and reduces manipulation risks
Calculating Impact Bid and Ask Prices (BTCUSDT Example)
To better reflect real market depth, OKX calculates impact prices using order book data.
Impact Bid Price Calculation
Assume impact size = 20,000 USDT:
| Order Book Level | Bid Price | Base Amount (BTC) | Notes |
|---|---|---|---|
| 1 | 90,000 | 0.02 | Value = 1,800 USDT – fully used |
| 2 | 89,900 | 0.06 | Cumulative = 7,194 USDT – fully used |
| 3 | 89,700 | 0.16 | Needs only 12,806 USDT → requires 0.14276 BTC |
Impact Bid Price = 20,000 / (0.02 + 0.06 + 0.14276) ≈ 89,780.8 USDT
Impact Ask Price Calculation
| Order Book Level | Ask Price | Base Amount (BTC) | Notes |
|---|---|---|---|
| 1 | 90,000 | 0.02 | Value = 1,800 USDT – fully used |
| 2 | 90,100 | 0.06 | Cumulative = 7,206 USDT – fully used |
| 3 | 90,200 | 0.16 | Needs only 12,794 USDT → requires 0.14184 BTC |
Impact Ask Price = 20,000 / (0.02 + 0.06 + 0.14184) ≈ 90,154.9 USDT
This approach ensures funding rates respond to actual liquidity rather than surface-level spreads.
Funding Fee Calculation
The actual fee paid or received is determined by:
Funding Fee = Position Value × Funding RateUSDT-Margined Contracts (e.g., BTCUSDT)
Position Value = Contracts × Contract Size × Multiplier × Mark PriceExample:
- Long position: 10 BTCUSDT contracts
- Mark price: $60,000
- Contract size: 0.01 BTC
- Funding rate: 0.1%
Position Value = $60,000 × 10 × 0.01 × 1 = $6,000
Funding Fee = $6,000 × 0.1% = **$6 (paid by longs to shorts)**
Crypto-Margined Contracts (e.g., ETHUSD)
Position Value = Contracts × Contract Size × Multiplier / Mark PriceExample:
- Short position: 100 ETHUSD contracts
- Mark price: $4,000
- Contract size: $10
- Funding rate: 0.1%
Position Value = (100 × $10 × 1) / $4,000 = 0.25 ETH
Funding Fee = 0.25 × 0.1% = 0.00025 ETH (paid by shorts to longs)
Collection and Distribution of Funding Fees
Fee Collection
OKX collects owed funding fees in full—even if equity drops below liquidation thresholds (i.e., margin ratio < 100%). Partial or full liquidation may follow if necessary.
- Isolated Margin Mode: Fees deducted directly from isolated margin balance.
- Cross Margin Mode (single-currency, multi-currency, portfolio): Fees drawn from cross-margin equity.
- Orders remain active during collection; no cancellations occur.
Fee Distribution
All collected funds are fully distributed to eligible counterparties.
- Isolated Positions: Funds credited to respective position margin.
- Cross-Margin Positions: Added to overall cross-margin equity.
This transparent flow ensures traders receive what they’re owed without platform interference.
Frequently Asked Questions
Q: What happens if I close my position right before funding time?
A: As long as your position is closed before the assessment timestamp, you will neither pay nor receive funding.
Q: Why did I get charged even after being partially liquidated?
A: Funding is assessed based on your position status at the exact moment of evaluation. If you were still holding a position—even briefly—you remain liable.
Q: Can funding rates predict market direction?
A: High positive rates often indicate bullish sentiment (more longs), while negative rates suggest bearish bias. However, they should be used alongside other indicators.
Q: Does OKX profit from funding fees?
A: No. OKX acts solely as a facilitator—the full amount paid by one side is transferred entirely to the other.
Q: How are max/min funding rates determined?
A: These caps vary per contract and are designed to prevent excessive fees during volatile periods.
Q: Are funding rates the same across all exchanges?
A: No—each exchange uses its own methodology. OKX’s updated model emphasizes fairness and resistance to manipulation.
👉 See real-time funding rates and analyze market sentiment across top perpetual contracts