OKX Updates Funding Fee Mechanism for Perpetual Swaps

OKX, a leading cryptocurrency exchange, has announced a significant update to the funding fee calculation and collection logic for its remaining perpetual swap contracts. This change shifts the mechanism from an inter-period collection system to an intra-period one, aiming to enhance service quality and align with trader expectations. The adjustment will be rolled out in two distinct batches.

This update is a crucial development for traders utilizing perpetual contracts, as it directly impacts the cost of holding positions overnight or across funding intervals. Understanding this new mechanism is vital for effective risk management and strategic planning.

What Are Perpetual Swap Funding Fees?

Perpetual swaps, or perpetual contracts, are derivative products that allow traders to speculate on the future price of an asset without an expiry date. A funding fee is a periodic payment exchanged between long and short traders. Its primary purpose is to tether the contract's market price to the underlying asset's spot price.

The fee rate is typically determined by the premium or discount of the perpetual contract price relative to the spot price. This mechanism ensures the contract trades in line with the spot market over the long term.

The Change: From Inter-Period to Intra-Period Collection

The core of this update lies in the timing of which funding rate is applied for the payment or receipt of fees.

Previous Mechanism (Inter-Period Collection)

Previously, OKX used an inter-period collection method. The funding fee charged at a specific time was calculated using the funding rate that was determined at the previous funding interval.

Example:
Assuming funding fees are collected every 8 hours at 00:00, 08:00, and 16:00 (UTC+8):

• At 08:00, the fee was calculated using the funding rate derived from the premium between 16:00 the previous day and 00:00 that same day.
• Consequently, the rate used at 08:00 was actually fixed and known from 00:00 onwards.

New Mechanism (Intra-Period Collection)

After the adjustment, OKX will implement an intra-period collection system. The funding fee charged will be calculated using the funding rate determined precisely at the moment of collection, based on the most recent data.

Example:
Using the same 8-hour intervals:

• At 08:00, the fee is now calculated using the funding rate derived from the premium index between 00:00 and 08:00 that same day.
• Important Note: This means the funding rate can fluctuate right up until the collection time. Traders must actively manage their positions based on real-time rate changes.

Key Implementation Timelines and Affected Contracts

The transition is scheduled for two main groups of contracts.

First Adjustment Batch

The first batch of contracts has already been transitioned. For the remaining contracts, the change will occur on February 21, 2024, at 00:00 (UTC+8).

The fourth batch of contracts affected includes:

USDT-Margined Perpetual Swaps (10 contracts):

• BTC-USDT, ETH-USDT, ORDI-USDT, SUI-USDT, TIA-USDT, BNB-USDT, BLUR-USDT, OP-USDT, ETC-USDT, PEOPLE-USDT

Coin-Margined Perpetual Swaps (5 contracts):

• BTC-USD, ETH-USD, FIL-USD, SOL-USD, DOGE-USD

Additional USDC-margined contracts are also included in this batch.

Detailed Timeline of the Changeover

The transition will be seamless but precise. The following table illustrates how the calculation basis shifts at the moment of adjustment:

All subsequent funding periods will follow the new intra-period method.

API Changes for Developers and Automated Systems

This update necessitates changes to OKX's API endpoints. The main modifications include:

• New fields in the funding rate and funding rate history interfaces to distinguish between the intra-period and inter-period methods.
• For contracts switched to intra-period collection, the nextFundingRate field will return a null value.

Developers and those running trading bots must update their systems to handle these new data points correctly to avoid errors. 👉 Review the updated API documentation for precise details.

Strategic Implications and Risk Management

This shift to intra-period collection increases transparency by aligning the fee charged with the most immediate market conditions. However, it also introduces an element of unpredictability right up until the funding timestamp.

• Active Management Required: Traders can no longer rely on a known, fixed rate for several hours before collection. The rate can change up to the last minute, potentially impacting the cost of holding a position.
• Strategy Adjustment: Strategies that involve holding positions through funding times must now account for this volatility in the funding rate itself.
• Avoiding Fees: To avoid paying or receiving a funding fee, the only certain method is to close the perpetual contract position before the scheduled funding time.

For a comprehensive understanding of how these fees impact your bottom line, 👉 explore more strategies on advanced trading mechanics.

Frequently Asked Questions

What is a funding fee in perpetual swaps?
A funding fee is a periodic payment made between traders holding long and short positions in a perpetual swap contract. It is designed to keep the contract's trading price aligned with the underlying spot market price. The direction of payment depends on whether the funding rate is positive or negative.

Why is OKX making this change?
The move from inter-period to intra-period collection is intended to provide a more transparent and fair system. It ensures the fee paid reflects the most recent market conditions at the exact time of collection, rather than a historical rate from hours prior.

How will I know which method a contract uses?
OKX will mark contracts using the new intra-period collection method with a lightning bolt icon (⚡) next to the funding rate display on their trading interface.

Does this change affect the frequency of funding fee payments?
No, the frequency remains unchanged (e.g., every 8 hours). Only the calculation basis for the rate applied at each interval is being updated.

What should I do to prepare for this change?
Review your current trading strategies, especially for the listed contracts. Ensure you understand that funding rates will be volatile until the collection time. Update any automated systems or bots that rely on OKX's API to accommodate the new data fields.

Where can I find the official announcement?
The official announcement and a complete list of all affected contracts across all batches can be found in the announcements section of the OKX website or support center.