FuturesHUB / Who pays funding
Perpetual futures
Who pays funding
Funding has a payer and a receiver. The sign of the realized rate picks them. You only participate if you are holding a position at the timestamp.
The usual sign
Positive rate: longs pay, shorts receive. Negative rate: shorts pay, longs receive. The payment is proportional to each position's notional, so a larger position pays or receives more. Accounts on the paying side fund accounts on the receiving side.
This sign is widespread and still not a law of nature. Before you automate around it, read one sentence on that contract's funding page that states who pays when the rate is positive. If the sentence disagrees with the habit, follow the sentence.
The venue is the pipe
The matching engine collects from one side and credits the other. You do not choose the account that pays you, and you do not invoice anyone. If one side cannot pay because a position has gone bankrupt, the insurance fund and, after that, auto-deleveraging are the backstops. Those mechanisms are about liquidation residuals more than about an ordinary funding print.
A funding payment is not the maker or taker fee. You can receive funding and still pay a taker fee for the trade that opened the position. Net them in the journal. Do not let a funding rebate hide a fee.
Flat, hedged, and one-sided
A flat account pays nothing. A hedge-mode account with equal long and short notionals pays on one side and receives on the other, so the net is about zero and the gross still shows two lines. A one-sided position takes the full payment.
If you are short because you are hedging coins you hold in spot, the funding you receive when the rate is positive is income on the hedge, and the funding you pay when the rate is negative is a cost of the hedge. Include it in the carry of the whole position, not only in the perpetual panel.
On the ticket
- Read the sign on the ticket at the timestamp.
- If you are long and the rate is positive, record a payment out. If you are short, record a receipt. Reverse both when the rate is negative.
- Confirm the sentence on the contract page the first time you trade that venue.
- On a hedge, record both lines and then the net. On a spot-plus-short hedge, add the net to the carry of the coin.
Questions
Do market makers get exempted from funding?
Funding follows the position, not the fee tier. A maker rebate on the trade is a different line from the funding cashflow.
What if the two sides do not add up?
Ordinary funding is balanced by construction. A shortfall after bankrupt liquidations is an insurance-fund problem, described on the insurance fund and auto-deleveraging pages.