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Funding Cost

BitMart Futures is a futures trading market, specifically a market for perpetual swaps, offered per the Terms and Conditions for BitMart Futures Market. 
Below is the [funding cost guide] for BitMart Futures:

 

BitMart Perpetual Swap uses a funding rate mechanism to anchor market price to the spot price. Funding cost is the core operating mechanism of a perpetual swap.

  • Funding occurs every 8 hours.
  • If funding cost rate is positive, long positions will pay funding cost to short positions. If funding cost rate is negative, short positions will pay funding cost to long positions. 
  • You will only pay or receive funding if you hold a position at one of these times.
  • If you close your position prior to the funding exchange, then you will not pay or receive funding.

 

Funding Cost

The calculation formula of the funding cost to be collected or paid by you is as follows:

Funding cost = Fund rate (Previous timestamp) * position value (timestamp)

*Position value is calculated based on Fair Price.

*Position value has no relationship with leverage. For example, if you were holding 100 contracts of BTCUSDT swap. The funding you may pay/receive is based on the notional value of these contracts, not based on how much margin are distributed in.

 

Calculation of Funding Cost

Funding cost rate consists of two parts: the interest rate and premium/discount. The purpose of such a rate is to ensure that the trading price of the perpetual swap follows an underlying reference price closely. In this way, the perpetual swap is similar to the margin trading spot market where buyers and sellers exchange funding cost rates on a regular basis. 

The interest rate depends on the borrow-lending rate of monetary base and pricing currency.

Interest rate (I) = (pricing interest rate index - basic interest rate index) / the interval of funding cost rate

 

Sometimes, the price of a perpetual swap has a significant premium or discount compared with a marked price. In such a case, the premium index will be used to raise or lower the next funding cost rate for it to match the trading level of the current perpetual swap.

The corresponding calculation is as follows:

Premium index (P) = reasonable basis of ( Max(0, depth weighted buying price - marked price) - Max(0, marked price -depth weighted selling price)) / spot price + marked price

 

After determining the premium index, we set a buffer limit of 0.05% to funding cost rate, so:

Funding cost rate (F) = premium index (P) + clamp (interest rate (I) - premium index (P), 0.05%, - 0.05%)

When I-P is within the range, funding cost rate F = I. in such case, we call it “normal value”, which means that funding cost rate is within the most stable range.

 

Limit of Funding Cost

The BitMart caps funding cost rate to ensure that the highest leverage can be used. In order to achieve so, we add two limits:

  1. Absolute upper limit of funding cost rate is 75% * (initial margin - maintenance margin). If initial margin is 1% and maintenance margin is 0.5%, maximum funding cost rate will be 75% * (1% - 0.5%) = 0.375%.
  2. The change of funding cost rate within the interval of funding cost shall not exceed 75% of the maintenance margin.

*BitMart does not charge any funding cost. Instead, funding cost is charged among users.

 

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