What are Funding Fees?

A funding fee is a type of money that is regularly sent and received to balance long and short positions in futures trading.

⚠️ Funding fees are not paid to the exchange, but rather to each other between users who hold positions.

Perpetual futures trades have no expiration date, which can lead to gaps in the spot price.

So exchanges use funding fees to adjust the futures price to be closer to the spot price.

In a typical case, every 8 hours, the difference between the long and short positions is calculated and the funding rate is paid to the other party.

• If the funding rate is positive, longs pay shorts

• Short pays long if the funding rate is negative

💡 Funding Fee Payment Example

If the funding rate is +0.01%.

→ Long position holder pays short position holder 0.01% of the contract value held by the long position holder

In case of -0.01% funding rate

→ Short position holder pays long position holder 0.01% of the contract amount held by short position holder

Funding fees are typically charged every 8 hours, but the frequency may be shorter depending on the liquidity of each pair or other circumstances.

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