Funding Rates

Funding Rates

Understanding funding rates is essential for traders to comprehend the cost implications of holding positions over extended periods on Intel Markets.

What are Funding Rates?

Funding rates serve as a mechanism in perpetual futures markets to ensure the price of the futures contract closely aligns with the spot price of the underlying asset. Unlike traditional futures contracts that have expiration dates, perpetual futures contracts do not expire, making funding rates crucial for maintaining market equilibrium.

Role of Funding Rates

• Balancing Mechanism: Funding rates act as a balancing mechanism, ensuring that the perpetual futures price converges towards the spot price of the underlying asset over time.

• Incentivizing Market Participants: Positive funding rates incentivize traders with long positions to pay traders with short positions, encouraging equilibrium between supply and demand in the market.

• Market Efficiency: By incentivizing traders to arbitrage price discrepancies between perpetual futures and spot markets, funding rates contribute to market efficiency and price discovery.

Intel Markets' Approach

• Calculation Method: Intel Markets employs a robust mechanism for calculating funding rates, ensuring accuracy and transparency in the process.

• Frequency of Updates: Funding rates on Intel Markets are updated regularly to reflect changes in market conditions and maintain alignment with spot prices.

• Fair and Transparent: Intel Markets prioritizes fairness and transparency in funding rate calculations, providing traders with access to real-time information and ensuring a level playing field for all participants.