What is a funding rate? How it works, who pays and when
Perpetual futures charge more than trading fees: every few hours, longs and shorts settle a funding payment. Here is what it is, how much one payment costs and when it is charged, with live data.
Why funding rates exist
Dated futures settle at the spot price when they expire, which keeps them close to spot. Perpetuals never expire, so exchanges use the funding rate to pull the contract price back toward spot:
- Contract above spot (more longs) → rate is positive → longs pay shorts.
- Contract below spot (more shorts) → rate is negative → shorts pay longs.
The money moves between traders; the exchange does not keep it. Exchanges earn from opening and closing fees.
How much one payment costs
Funding payment = position value × funding rate
Position value is size × mark price; leverage does not change it. A 10,000 USDT position pays or receives 1 USDT at a 0.01% rate whether it uses 2x or 20x. Higher leverage only makes that payment a bigger share of your margin.
At Binance BTC's current +0.0037%, a 10,000 USDT long pays about 0.37 USDT this period, and a short does the opposite.
When it is charged
Major coins like BTC and ETH usually settle every 8 hours at 00:00, 08:00 and 16:00 UTC, but more than half of all contracts (mostly smaller coins) now settle every 4 hours, and a few every hour. You only pay or receive if you hold the position at the settlement time. Holding for 3 hours or 7 hours can both hit just one settlement.
When intervals differ, rates cannot be compared directly. IRYS on Binance settles every 1h at +0.0318% per period, which is +0.2543% on an 8-hour basis. Our tables always include a per-8-hour column. Settlement intervals by contract →
How the rate is calculated
Formulas are similar everywhere: funding rate ≈ premium index + an interest component, clamped to a cap and floor. The premium index measures how far the contract trades above spot and keeps moving until settlement. The interest part is 0.01% per 8 hours on most exchanges, which is why many coins sit near 0.01% in calm markets. In volatile markets rates hit their caps, and some exchanges temporarily shorten the interval.
Reading APR
APR = rate per period × periods per day × 365. 0.01% every 8 hours is about 10.95% a year. It only restates today's rate; the rate changes every period. What was actually paid over the last 30 days is the real number. See 30 days of settled funding →
Work out the cost of your position
Enter coin, size, side and holding time in the holding cost calculator to see how many settlements you will hit on each of 6 exchanges, and the funding plus trading fees, at the current rate and the 7-day average.
FAQ
Is the funding rate a fee charged by the exchange?
No. Funding moves between longs and shorts; the exchange does not keep it. Trading fees for opening and closing are separate.
When the funding rate is positive, should I go long or short?
With a positive rate, longs pay shorts, so shorts receive a little each period. Price moves usually matter far more than funding, so the rate alone should not decide your direction.
Do I pay funding if I close before the settlement?
No. You only pay or receive funding if you still hold the position at the settlement time.
Why is the funding rate different on each exchange?
Each exchange has its own contract price, index and mix of longs and shorts, so the rate differs. Intervals can differ too, so compare over the same holding time.