The purpose of funding fee is to promote a better following to index prices by a means of funding that compensates between longs, as well, shorts.
Billance does not charge any fees on the funding fee. It is exchanged directly by way of peer-to-peer.
Collection: The Funding fee is exchanged between longs and shorts every eight hours, respectively at UTC 00:00, UTC 08:00 and UTC 16:00. Only when you hold a position at these points in time you will pay or receive the funding fee. If the position is closed before the charging time, no funding fee whatsoever shall be paid or received.
When the funding fee is positive, long pays short and accordingly, when the funding fee is negative, short pays long. In the possibility that you have two-direction holdings, the naked position will be used to calculate the funding fee.
Funding Fee Calculation
Funding fee = Position Value* Funding Rate
Your position value is not related to your leverage value. For example, if you hold 100 BTC or USDT contracts, you will pay or receive funding fee according to the nominal value of these contracts, and not based on how much margin you have allocated to the actual position.
Funding Rate Calculation
Funds Rate (F) = Premium Index (P) + clamp (Interest Rate (I) - Premium Index (P), 0.05%,-0.05%)
Premium Index (P) = (Max (0, Impact Weighted Purchase Price - Mark Price) - Max (0, Mark Price - Impact Weighted Sale Price) / Spot Price + Fair Basis of Mark Price
Interest Rate (I) = (Quote Interest Rate Index - Base Interest Rate Index) / Funding Rate Interval
Funding Rate Caps
Billance caps on the Funding Rate, thus ensuring maximum leverage can still be utilized. To do this, two caps are imposed:
The absolute Funding Rate is capped at a maximum of 75% of the Initial Margin or Maintenance Margin. If the Initial Margin is 1% and the Maintenance Margin is 0.5%, the maximum Funding Rate will be 75% * (1% - 0.5%)= 0.375%.
The Funding Rate may not change by more than 75% of the Maintenance Margin between Funding Intervals.