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Glossary

Funding rate

Part of the theme Derivatives and contracts.

Definition

A funding rate is a periodic payment exchanged directly between the long and short holders of a perpetual contract to keep its price near the underlying spot price.

It is not a fee to the exchange. When the perpetual trades above the index, longs pay shorts; when it trades below, shorts pay longs. It is charged on notional, so leverage multiplies its cost.

Formula / example: 0.01% funding on $50,000 notional is $5 per period

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