Funding Mechanism
Perpetual futures contracts do not have an expiration date. To ensure that the perpetual contract price remains closely aligned with the underlying spot market, AZX implements a periodic funding mechanism.
Funding transfers value between long and short positions based on market conditions, incentivizing traders to take positions that restore price balance.
What Is the Funding Rate
The funding rate represents the cost of holding a perpetual futures position. It reflects the difference between the perpetual contract price and the underlying spot market price.
The funding rate determines which side of the market pays funding and which side receives it.
Funding Payment Direction
Positive funding rate When the perpetual contract price trades above the spot price, the funding rate is positive. Long positions pay funding fees to short positions.
Negative funding rate When the perpetual contract price trades below the spot price, the funding rate is negative. Short positions pay funding fees to long positions.
Funding payments are exchanged directly between traders. AZX does not charge any fees on funding payments.
Funding Payment Timing
Funding payments are applied at predefined funding timestamps.
Key rules governing funding payments:
Funding is charged only to positions that are open at the funding timestamp.
Positions opened after the funding timestamp do not incur funding until the next interval.
Positions closed before the funding timestamp do not pay or receive funding.
Funding payments are applied immediately at the funding timestamp.
A standard funding interval is typically 8 hours, for example at 00:00, 08:00, and 16:00 UTC.
Funding and Margin Impact
Funding payments are deducted in the following order:
Available account balance
Position margin, if the available balance is insufficient
If funding fees are deducted from position margin:
The effective margin of the position decreases
The liquidation price moves closer to the mark price
Liquidation risk increases
If the margin becomes insufficient to cover the funding fee, the margin may temporarily appear negative. Liquidation does not necessarily occur if unrealized profits are sufficient to support the position.
Traders are advised to maintain sufficient available balance to reduce liquidation risk caused by funding deductions.
Variable Funding Intervals During Volatility
During periods of extreme market volatility, the standard funding interval may be adjusted to accelerate price convergence between the perpetual contract and the spot market.
In such cases:
Funding intervals may be shortened to 6 hours, 4 hours, or even 1 hour
Funding frequency is increased to encourage faster price correction
Adjustments are applied transparently and only when necessary
These measures are designed to maintain orderly markets and proper price discovery.
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