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What Is the Purpose of the ‘Funding Rate’ in a Perpetual Swap Contract?

A periodic payment between long and short positions to keep the perpetual swap price anchored to the spot price of the underlying asset.
Greeks.Live14.11.25

What Is the Purpose of the ‘Funding Rate’ in a Perpetual Swap Contract?

The funding rate is a mechanism used in perpetual swap contracts to keep the contract's price anchored to the spot price of the underlying asset. It is a periodic payment exchanged between the long and short positions.

If the swap trades at a premium to spot, longs pay shorts; if at a discount, shorts pay longs.

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