Purpose of Fund Fees
As expiry date approaches, the price of a traditional futures contract will inch toward the spot price. For a perpetual contract, there is no expiry date. To ensure that contract price is constantly in line with spot price, Binance Jex employs a mechanism known as fund fee. By exchanging fund fees between long and short position holders, the contract price is able to be anchored to the spot price.
Principle of Fund Fees
The further the contract price deviates from the spot price, the higher the corresponding fund fees will be. This mean a higher operating cost for position holders of this direction, and at the same time it will encourage traders to open positions in the opposite direction to earn fund fees. In order words, the fund fee mechanism keeps contract price anchored to spot price by affecting supply and demand.
- Let’s assume that the spot price of BTC is 10,000 USDT. If the fund fee mechanism is not implemented, and the quantity of long orders in the platform far exceeds that of short orders, then the contract price may surge to 12,000 USDT;
- With the fund fee mechanism implemented, long position holders will now have to pay a large sum of fund fees and short position holders will receive the fund fees. This will encourage traders to go short, and as the demand increases, the contract price will gradually inch toward the spot price.
Fund Fee Exchange
Fund fees are exchanged between long and short position holders every eight hours at 00:00, 08:00 and 16:00 of Singapore time. You will only need to pay fund fees if you hold a position in one or more of the three times. If you close your position before the exchange time, you will not need to pay and will not receive fund fees.
Fund Fee = Mark Position Value * Fund Fee Rate
Mark Position Value = Mark Price * Position Size
- When fund fee rate is positive, longs pays shorts. When fund fee rate is negative, shorts pays longs.
- Fund Fees will be deducted from your position margin. Please note that as fund fees are exchanged every eight hours, too many payments may result in your position being liquidated. If you receive fund fees, the amount received will be added to your futures account balance and can be used instantly.
- If, after pre-deducting the estimated fund fees for next timestamp, the sum of your position margin and your floating PNL fails to meet maintenance margin rate requirement, then the position will be liquidated.
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