The funding rate and funding fees are two related but distinct concepts in perpetual contract trading.
The funding rate is a measure of the rate that current position holders should pay or receive, used to adjust the difference between the perpetual contract price and the underlying index price. It consists of two parts: the interest rate and the premium, and is dynamically adjusted based on market demand and supply conditions. The funding rate is calculated based on the difference between the perpetual contract price and the underlying asset price, as well as the leverage level used for the position. The funding rate is usually expressed as a percentage and is charged or paid at each funding interval, typically every 8 hours in most cryptocurrency exchanges.
Funding fees are the costs calculated based on the funding rate and the nominal value of the position, i.e., the fees that each user needs to pay or receive in each funding rate settlement period. Funding fees can be positive or negative, depending on the direction of the position and the current funding rate. When the funding rate is positive, long positions need to pay funding fees to short positions; conversely, short positions need to pay funding fees to long positions.
