In order to optimize user experience and benefits in Futures trading, Nami has introduced the Funding Rate mechanism from 2022-10-23 09:00 (UTC). This Funding Rates mechanism will replace the Swap Fee mechanism applied before.
What is the Funding Rate?
Funding rates are periodic payments between traders to make the perpetual futures contract price close to the index price, or the underlying crypto constituting the futures contract. A perpetual futures contract is an agreement to buy or sell an asset at a predetermined price without an expiration date on the contract.
When the the funding rate is positive, traders who are long on a perpetual contract will pay a funding fee to traders on the opposing side. On the other hand, when funding rate is negative, traders who are short on a perpetual contract will pay a funding fee to long traders.
Why is this important?
The funding rate is primarily used to force convergence of prices between the perpetual contract and the underlying asset.
Unlike traditional futures, perpetual contracts have no expiration date. Thus, traders can hold positions to perpetuity unless he gets liquidated. As a result, trading perpetual contracts are very similar to spot trading pairs.
As such, crypto exchanges created a mechanism to ensure that perpetual contract prices correspond to the index. This is known as Funding Rate.
How are Funding Rates calculated?
Funding rates are calculated using the following formula:
Funding Amount = Position Volume × Funding Rate
(Position Volume = Market Price x Size of Contract)
Basic Funding Rate and Flexible Funding Rate
In order to better adapt to market developments and balance actual trading status on Nami Exchange, from 2023-10-12 08:00 (UTC), Nami Exchange applied a flexible funding mechanism for all Futures trading contracts.
Flexible funding rate = |Basic funding rate| x Ratio of trading volume from the side paying / trading volume from the side receiving
Example of Basic and Flexible Funding Rate:
1.The trading contract X/USDT has basic funding rate of 2 %, actual Futures Trading Volumes cross the whole Nami Exchange at the funding time are 1,000,000 USDT of Long and 2,000,000 USDT of Short (The ratio of Paying / Receiving = 1/2)
2.The trading contract X/USDT has basic funding rate of 2 %, actual Futures Trading Volumes cross the whole Nami Exchange at the funding time are 2,000,000 USDT of Long and 1,000,000 USDT of Short (The ratio of Paying / Receiving = 2)
Adjustment of Funding Interval
By default, funding payments occur every 8 hours at 00:00 UTC; 08:00 UTC and 16:00 UTC for all Nami Futures perpetual contracts. In the event of extreme market volatility, Nami reserves the right to update the funding interval of a perpetual contract that differs from the default 8-hour funding interval as described below.
In the event of extreme market volatility, Nami reserves the right to update the funding interval of a perpetual contract that differs from the default 8-hour funding interval. Users can visit the Real-Time Funding Rate and Funding Rate History pages to find out the latest funding interval.
To understand clearly, users can refer to the following example:
You have a Long position with the BTC/USDT contract with a volume of 0.5 BTC. At the time of funding, the BTC price was 30,000 USDT, the position volume at that time was 0.5 x 30,000 = 15,000 USDT, the trading volume ratio between the two directions Long / Short was approximately, meaning the basic funding rate was nearly equal to the flexible funding rate
Let's say the basic funding rate right now is -0.0025%. That means users who have opening Short position will have to pay a funding fee, users who have opening Long position will receive funding, you will receive funding worth 15,000 x 0.0025% = 0.375 USDT from the Short side at the above time. .
How to check Funding Rate on Nami Exchange website?
Step 1: Access Funding Rate History site
Step 3: tracking Real-time Funding Rate and Funding History of all contracts
How to check Funding Rate on Nami Exchange application?
Step 1: Access the Nami Exchange application, open NAO Futures or Nami Futures and select Funding info on the toolbar. Then select Funding History
Step 2: tracking Real-time Funding Rate and Funding History of all contracts
Note: Images are for illustration purposes only and may not be the latest interface version on the Nami Exchange website and application.
Note: Nami reserves the right in its sole discretion to amend or change or cancel this announcement at any time and for any reasons without prior notice.
Risk Warning: Futures trading carries substantial risk and the possibility of both significant profits and losses. Past gains are not indicative of future returns. All of your margin balance may be liquidated in the event of extreme price movements. The information here should not be regarded as financial or investment advice from Nami. All trading strategies are used at your discretion and your own risk. Nami will not be liable to you for any loss that might arise from your use of Futures.
About Nami Exchange
Nami Exchange is a trading platform belonging to the Nami Foundation ecosystem that enables dynamic trading and effective investing through its Spot and Futures trading systems, which offer a wide selection of nearly 700 trading pairs, support leverage up to x125, and 24/7 live support in Vietnamese & English.
Download Nami Exchange app here.