Funding is the mechanism used to ensure that the derivative’s price stays close to the index price. In order for the price to stay close to the index price during demand swings, we conduct an obligatory payment between the two parties to the transaction.
For instance, when the BTC price is higher than the index price (the real price), those going long pay the funding rate directly to those going short. This is known as positive funding. Negative funding, on the other hand, means that the demand swing is in the favour of those selling. In this case, those going short pay the funding rate to those going long.
Funding on the Scalpex exchange occurs every minute in order to avoid price manipulation.
We redistribute our funding regularly, which means that holding a position on the Scalpex exchange turns out either entirely free or much cheaper than on any other exchanges that use the 8-hour window.
The funding rate percentage, expressed as an 8-hourly interest rate, is calculated as follows:
- Premium Rate:
Premium Rate = ((Mark Price – Index Price) / Index Price) * 100%
- Funding Rate:
From the Premium Rate, the Funding Rate can be calculated by applying a dampener. If the Premium Rate is within -0.05% and 0.05%, the actual Funding Rate will be reduced to zero.
- If the premium rate is lower than -0.05%, then the actual funding rate will be the Premium rate + 0.05%.
- If the premium rate is higher than 0.05%, then the actual funding rate will be the Premium rate – 0.05%.
- Funding Rate = Maximum (0.05%, Premium Rate) + Minimum (-0.05%, Premium Rate)
- Therefore, the Time Fraction is calculated as follows:
Time Fraction = Funding Rate Time Period / 8 hours
The actual Funding Payment is calculated by multiplying the Funding Rate by the position size in BTC and the Time Fraction.
Funding Payment = Funding Rate * Position Size BTC * Time Fraction
Kindly note that we do not charge any funding fees and all funding is transferred directly between the parties trading the perpetual contracts.
In the case that you do not have enough balance for funding, the liquidation engine will start to gradually decrease the amount of your collateral. At first, the engine will attempt to cancel the limit orders that are increasing your position and requiring additional collateral. If that does not suffice, it will start to decrease the size of your position in order to gain funds (with an additional surplus) for both current and future fundings.
You can take a look at contract specifications in further detail here.
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