A funding rate sets a periodic payment between holders of long and short positions in a perpetual contract. Exchanges use this mechanism to help keep a perpetual contract near its reference market. The formula and settlement schedule vary by venue and instrument.
Payment Direction
A positive rate may result when a contract trades at a premium under an exchange's formula, and longs may pay shorts. A negative rate may send payment from shorts to longs. The exchange's contract rules define the sign convention, calculation inputs, and who pays.
Funding is a transfer between eligible positions. It is separate from trading fees, margin interest, and price profit or loss.
Notional Example
Assume a contract applies a funding rate of 0.01% to $10,000 of eligible notional. The payment is $1 for that settlement period. A real payment depends on the exchange's notional method, position size, rate, and settlement time. The example does not imply an eight-hour schedule or a fixed future rate.
A trader holding a perpetual position across several settlements can add each payment to the position's costs or income. The rate can change before the next settlement.
Reading Funding Data
Funding can describe the relative price of a perpetual contract and its reference, under the venue's formula. It cannot show the full position distribution or forecast a price move on its own. Compare it with open interest, market price, and contract terms.
For more detail on rate calculations and carry costs, see the Funding Rate Guide and Perpetual Swaps. Compare venue rules in Bybit's funding-fee documentation and Hyperliquid's funding documentation.