Funding Payments

The funding rate is the mechanism that keeps the perpetual contract's price anchored to the underlying spot price. Without funding the perp could diverge indefinitely from spot, so funding provides a constant economic incentive to keep this gap close. Funding is peer-to-peer, paid every hour, and computed on an 8-hour rate:

$$F = \text{clamp}\left(\frac{P + \text{effectiveInterest}}{8},\ -4\%,\ +4\%\right)$$

If the contract price trades above spot, longs pay shorts (positive rate); if it trades below spot, shorts pay longs (negative rate). RISEx uses the index price, not the mark price, when calculating notional size. Funding rates are clamped at ±4% per hour by default. Some markets carry a per-market interest dampener instead

$$\text{Funding Payment} = \text{positionSize} \times \text{oraclePrice} \times F$$

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Components of the Rate

Interest Component

For most markets, the $\text{effectiveInterest}$ is a fixed rate $r = 0.01\%$ per 8 hours ($0.00125\%/\text{hr} \sim 11.6\%$ APR), added on top of the premium. It represents the cost to borrow, embedding cost synthetically where longs pay carry cost - always assuming there is more speculation in the market where traders will borrow to be long.

Average Premium Index (P)

The premium index measures how far the perp is trading from spot. It's sampled every 5 seconds and averaged over the hour:

$$P = \frac{\text{impactPrice}}{\text{oraclePrice}}$$ $$\text{impactPrice} = \max(\text{impactBid} - \text{oraclePrice},\ 0) - \max(\text{oraclePricex} - \text{impactAsk},\ 0)$$

• $\text{impactBid}$: average fill price to buy impactNotional worth of the asset
• $\text{impactAsk}$: average fill price to sell $\text{impactNotional}$ worth of the asset

This looks at the average price to buy or sell in order to determine whether the book is trading at a premium or discount relative to the index price - what traders are signaling by their positions on the book.

Interest Rate Dampener

Some markets carry a per-market dampener $d$ around the interest rate $r$, the same way Binance treats funding rates:

$$\text{effectiveInterest} = \begin{cases} r & \text{if } d = 0 \\ \text{clamp}(r - P,\ -d,\ +d) & \text{if } d > 0 \end{cases}$$ $$F = \text{clamp}\left(\frac{P + \text{effectiveInterest}}{8},\ -4\%,\ +4\%\right)$$

• $d = 0$: the $\text{effectiveInterest}$ is constant, collapsing back to the plain formula above.
• $d > 0$: while $P$ stays inside the stability zone $[r - d,\ r + d]$ (boundaries included), the clamp never saturates and funding is pinned to $F = r/8$. Outside the zone, the dampener absorbs a fixed $d$ worth of the premium and the remainder drives funding as normal:

$$F = \begin{cases} (P - d)/8 & \text{if } P > r + d \\ (P + d)/8 & \text{if } P < r - d \end{cases}$$

The dampener only reshapes the interest term - it's independent of the ±4%/hr outer clamp, which applies the same way to every market.

Example 1: BTC/USDC, no dampener ($d = 0$)

$P = +6\text{ bps}$, $d = 0$, the $d = 0$ branch executes: $\text{effectiveInterest} = r = 1\text{ bps}$.

$$F = \frac{6 + 1}{8} = 0.875\text{ bps per settlement}$$

Example 2: XAU/USDC, dampened ($d = 5\text{ bps}$)

$P = +6\text{ bps}$, $d = 5\text{ bps}$, the $d \gt 0$ branch executes

$$\text{effectiveInterest} = \text{clamp}(1 - 6,\ -5,\ +5) = -5\text{ bps} \\ F = \frac{6 + (-5)}{8} = 0.125\text{ bps per settlement}$$

Same premium, same market conditions - the dampener reduces funding from $0.875$ to $0.125\text{ bps}$, a 7x reduction, pinning funding to the flat $r/8$ instead of following every small move in the premium.