Unlike futures, perpetuals do not have an expiration date. The perpetual price and the index price do therefore not automatically converge as the contract approaches settlement, since there is no settlement in the traditional sense. To make sure that the perpetual price stays close to the index price, Thalex uses a funding rate mechanism.
The funding rate mechanism of Thalex follows the convention that when the perpetual price trades at a premium to the index price, traders with a long position pay funding to traders with a short position. Conversely, traders with a short position pay funding to traders with a long position if the perpetual price trades at a discount to the index price.
Thalex’s funding rate mechanism has the following features:
- Continuous calculation of funding. Thalex calculates the funding rate in quasi-real time and funding payments are continuously exchanged between traders (added to or deducted from unsettled PNL).
- 8-hour basis. Thalex funding rate is based on an 8-hour period.
Please see our Contract Specifications for more information.