1、What is Funding Rate Mechanism?

The funding rate mechanism is the core operating mechanism of MEXC Futures that allows long and short traders to exchange funding fees on a regular basis based on the difference between the market price of perpetual futures and the spot price. When the market is bullish and the funding rate is positive, the long trader of the perpetual futures will pay the funding fee to the short trader. Conversely, when the market is bearish and the funding rate is negative, the short trader of the perpetual futures will pay the funding fee to the long trader.

 

2、Why is the purpose of Funding Rate Mechanism?

The main purpose of the funding rate is to allow the market to self-regulate by exchanging funding fees between long and short positions on a regular basis, so that the market price of perpetual futures can be used as an anchor for the spot price.

Unlike traditional futures, perpetual futures contracts have no expiration date. Therefore, a trader can hold the position to perpetuity unless it is liquidated. Trading perpetual futures is very similar to trading spot pairs, but in order to keep the market price of perpetual futures from deviating, the funding rate mechanism is required to ensure that the price of perpetual futures is used to anchor the spot price.

 

3、How does Funding Rate Mechanism work?

• MEXC does not charge any funding fees to the users. The funding fees are charged between users who hold positions on opposing sides.

• The funding fee settlement for all MEXC perpetual futures is preset to take place every 8 hours at 00:00 (UTC), 08:00 (UTC) and 16:00 (UTC).

• Traders are only required to pay or receive a funding fee if they hold a position at the time of funding fee settlement. If you close your position prior to the time of funding fee settlement, you will not be required to pay or receive any funding fee.

• If the funding rate is positive, the long trader will pay the funding fee to the short trader. Conversely, if the funding rate is negative, the short trader will pay the funding fee to the long trader.

• The funding fee paid by the trader will be deducted from the available margin. If a trader's available margin is insufficient, the funding fee will be deducted from the position margin, at which point the liquidation price will become closer to the fair price due to the deduction, thus increasing the risk of liquidation.

 

Notes：

• Under normal circumstances, the funding fees of all MEXC perpetual futures are settled every 8 hours. However, in the event of extreme market volatility, MEXC reserves the right to adjust the funding fee settlement cycle of perpetual futures, which may differ from the preset 8-hour cycle.

• The funding fee settlement does not affect regular trading activities. However, due to the complexity of processing, there may be some delay in statistics regarding the time of funding fee payment and its release. Any orders executed 15 seconds before or after the time of funding fee settlement may or may not be included in the most recent funding fee settlement. For instance, if a trader opens or closes a position at 08:00:05 (UTC), he may still be charged or paid a funding fee. Please plan your trading time carefully.

• The current rates shown on the page are non-fixed rates and shall be adjusted according to the market dynamics.

4、How to check Funding Rate?

On Futures page, you will find the funding rate of the current settlement cycle and the time left until the current settlement cycle ends for each futures trading pair.

You can also click on [Funding Rate History] under [Information] to view all funding rates from past settlements of the underlying futures.

5、How to calculate Funding Fees?

The funding fee can be easily calculated based on the funding rate.

 

The funding fee calculation for USDT-M futures is as follows:

Funding Fee = Position Value x Funding Rate

Position Value = Position Size (Token) x Fair Price

 

Example: Trader A holds a long position of 10 BTC in the BTCUSDT futures, while the current fair price is 10,000 USDT and funding rate is 0.01%.

Current Position Value = 10 x 10,000 = 100,000 USDT

Funding Rate = 100,000 x 0.01％= 10 USDT

Since the funding rate is positive (0.01%), the long trader must pay the funding fee to the short trader. Therefore, Trader A (long trader) must pay a 10 USDT funding fee, while the short trader holding the same quantity of futures will receive a 10 USDT funding fee.

 

The funding fee calculation for COIN-M futures is as follows:

Funding Fee = Position Value x Funding Rate

Position Value = Position Size (Cont.) x Face Value of Futures / Fair Price

 

Example: Trader A holds a long position of 100 cont. of BTCUSD futures with the face value of 1 cont. of BTCUSD futures being 100 USD, while the current fair price is 10,000 USDT and funding rate is 0.01%.

Current Position Value = 100 x 100 / 10,000 = 1 BTC

Funding Rate = 1 BTC x 0.01% = 0.0001 BTC

Since the funding rate is positive (0.01%), the long trader must pay the funding fee to the short trader. Therefore, Trader A (long trader) must pay a 0.0001 BTC funding fee, while the short trader holding the same quantity of futures will receive a 0.0001 BTC funding fee.