Funding Rate Policies

Funding rates are the mechanism by which perpetual contract prices converge to the underlying index price. Payments flow between long and short traders based on the spread between mark and index prices.

Calculation

The funding rate is computed in basis points (bps) using the formula:

base_rate_bps = (mark_price - index_price) / index_price * 10,000
effective_rate_bps = base_rate_bps * ticks_elapsed

Where ticks_elapsed is the number of funding intervals since the last application.

Tick-Based Intervals

Funding is applied on a tick schedule rather than continuously:

• Funding tick = timestamp / funding_interval

• Funding only applies when current_tick > last_funding_tick

• Skipped if index_price == 0 or mark_price == index_price

This batching approach ensures deterministic funding across all nodes.

Payment Direction

Condition	Long Traders	Short Traders
mark > index	Pay	Receive
mark < index	Receive	Pay

Payment amount per position:

notional = base_position * mark_price
payment = -(notional * effective_rate_bps / 10,000)

The negation ensures longs pay when the rate is positive (mark above index).

State Updates

On each funding application:

1. collateral balances adjusted by payment amount

2. realized_pnl updated on each position

3. Market state records:

   • last_funding_tick — prevents duplicate payments

   • cumulative_funding_bps — running total for historical reference

   • Updated mark_price and index_price

Zero-Sum Property

Funding is always zero-sum between counterparties. The system does not create or destroy value through funding—it only transfers between longs and shorts.