Funding Fee

Last updated: 07/24/2026 06:05:40

1. What Is the Funding Fee?

The funding fee is a core mechanism in the perpetual futures market designed to limit the deviation between the perpetual contract price and the corresponding spot index price. When perpetual contract trades at a significant premium or discount relative to the spot market, the funding mechanism facilitates periodic cash transfers between long and short position holders, guiding the contract price back toward the spot index price.

Please note that the funding fee is not charged by the platform. Instead, it is a transfer of funds between long and short position holders. KuCoin only acts as the matching and settlement platform and does not participate in or profit from the funding fee.

The actual fee assessment may take up to a minute. For example, if you open a position at 00:00:20 UTC, you could still be subject to the funding fee (either collecting or distributing the funding fee) if the fee assessment has yet to end.

2. Funding Fee Settlement Mechanism

2.1 Settlement Frequency and Time

Currently, the funding fee settlement cycle for major trading pairs is once every 8 hours, while most other trading pairs are settled once every 4 hours.

When significant premiums or discounts occur (for example, when the funding rate reaches the upper or lower limit of a trading pair), the system may temporarily adjust the settlement cycle to once every 1 hour based on actual market conditions, in order to accelerate price convergence. Once the market returns to normal, the settlement cycle will revert to 4 hours (please refer to page displays and official announcements).

The actual funding fee settlement time may be dynamically adjusted according to market conditions. Please refer to the real-time display on the trading page for the most accurate information.

2.2 Who Pays or Receives the Funding Fee

Only users who hold open positions at the funding fee settlement time are required to pay or receive funding fees.
If all positions are closed before settlement time, no funding fee will be charged or received.

2.3 Direction of Funding Fee Payment

When the funding rate is positive: Long positions → pay funding fees for short positions
When the funding rate is negative: Short positions → pay funding fees for long positions

2.4 Funding Fee Collection and Payment

The platform will fully collect or distribute the funding fee. After a funding fee is charged, users may be subject to position reduction or liquidation if margin requirements are not met.
Isolated Margin Mode: Funding fees are deducted from or credited to the isolated position margin.
Cross Margin Mode: Funding fees are deducted from or credited to the available balance of the futures account.

3. How the Funding Rate Is Calculated

Funding rate = clamp [ ( Average premium index + clamp ( Interest rate − Average premium index, 0.05%, −0.05% ) ) / ( 8 / N ), Funding rate cap, Funding rate floor ]

Where:

Average Premium Index: The premium index calculated using a time-weighted average methodology.
Interest Rate: Fixed at 0.01% for all funding settlement intervals.
N: The funding settlement interval, in hours.
Funding rate cap / floor: Varies by contract. Please refer to the corresponding contract page for details.

3.1 Premium Index

The Premium Index measures the deviation of the contract price from the Index Price and is calculated as follows:

Premium index = [Max (0, Impact bid price – Index price) – Max (0, Index price – Impact ask price)] / Index price

Impact value = depth unit × max leverage

Where:

Impact depth unit is typically 50, 100, or 200, depending on the contract configuration.
Maximum leverage is determined by the contract specifications.

Example of Impact Price Calculation

Assume:

Impact Depth Unit = 200
Maximum Leverage = 100x
Impact Value = 200 × 100 = 20,000 USDT

Bid Level	Price	Quantity (BTC)	Total（USDT）	Depth-Weighted Executed Quantity (BTC)
1	90,000	0.02	1,800	0.02
2	89,900	0.06	7,194	0.06
3	89,700	0.16	21,546	20,000-7,194 =12,806 USDT 12,806/89,700 = 0.14276 BTC

Impact Bid Price = 20,000 USDT /（0.02+0.06+0.14276）BTC=89,780.8 USDT

3.2 Average Premium Index

The Average Premium Index is calculated using a time-weighted average:(1 × Premium₁ + 2 × Premium₂ + … + n × Premiumₙ) / (1 + 2 + … + n)

Where:

The Premium Index is sampled once per minute.
More recent observations are assigned higher weights.
All samples collected during the previous funding settlement interval are included in the calculation.

Example

For a contract with an 8-hour funding settlement interval, if the current time is 14:59, the Average Premium Index is calculated using 480 one-minute Premium Index samples collected between 07:00 and 14:59, applying the time-weighted average formula above.

3.3 Impact of Different Funding Settlement Intervals

With the introduction of the 8/N normalization factor, the funding rate applied at each settlement varies depending on the funding settlement interval.

Funding Settlement Interval	N	Funding Rate per Settlement
8 hours	8	Unchanged
4 hours	4	Approximately half of the 8-hour funding rate
2 hours	2	Approximately one-quarter of the 8-hour funding rate
1 hour	1	Approximately one-eighth of the 8-hour funding rate

4. How the Funding Fee Is Calculated

4.1 Basic Formula

Funding Fee = Position Value × Funding Rate

The position value is calculated based on the mark price at the funding fee settlement time.

4.2 Position Value by Contract Type

(1) U-Margined Perpetual Contracts

Position Value = Position Size × Mark Price

Example: A user holds a 0.01 BTC long position in a BTC perpetual contract.

Mark price at settlement: 5,000 USDT
Funding rate: 0.01%

Calculation:

Position value = 0.01 × 5,000 = 50 USDT
Funding fee = 50 × 0.01% = 0.005 USDT

If the funding rate is positive, the long position pays 0.005 USDT for the short position, which receives the same amount.

(2) Coin-Margined Contracts

Example: A user holds 10,000 USD of a BTCUSD perpetual contract (long position).

Mark price at settlement: 50,000 USDT
Funding rate: 0.025%

Calculation:

Position value = 10,000 ÷ 50,000 = 2 BTC
Funding fee = 2 × 0.025% = 0.0005 BTC

If the funding rate is positive, the long position pays 0.0005 BTC, and the short position receives the same amount.

5. Purpose and Impact of Funding Fees

Maintain price anchoring: Funding fees facilitate interest transfers between long and short positions to keep the contract price close to the spot price.
Stabilize market structure: Settlement frequency may be increased during extreme premiums or discounts to accelerate price normalization.
Controlled risk exposure: Funding rates are subject to system-defined upper and lower limits, preventing excessive costs for users during extreme market conditions.