Funding

A perpetual contract has no expiry date. Without an expiry, buyers and sellers need an ongoing economic reason for its price to remain close to the underlying market.

Funding provides that reason through periodic payments between long and short positions. It is a transfer between traders, separate from the fee charged for executing an order.

Who pays whom

When the perpetual mark is above the index, the funding rate is positive and long positions pay short positions. Holding the comparatively expensive side of the market becomes more costly.

When the mark is below the index, the rate is negative and shorts pay longs. The direction reverses because the perpetual is trading below its reference.

The payment does not force the two prices to be equal. It changes the economics of holding each side and encourages trading that narrows the difference.

Calculating the rate

The reference premium is the difference between mark and index relative to the index:

premium rate = (mark price - index price) × 1,000,000 / index price

The result is expressed in parts per million and constrained by the market’s funding cap and floor.

For example, a mark of 10,010 and an index of 10,000 produce a premium of 1,000 parts per million, or 0.10%, before the cap is applied.

Settling a funding interval

At the funding time, Novrinex calculates each open position’s settlement notional and applies the accepted rate. Positive funding debits longs and credits shorts; negative funding does the reverse.

Only positions open at the interval participate. A trader who closed earlier has no position to fund, while a trader who remains open across several intervals pays or receives each interval separately.

The payment changes collateral and can move an account closer to or farther from liquidation.

Rounding and conservation

Individual payments round down according to the protocol rule. Differently sized positions can leave a small residual even when the market’s total long and short quantity is equal.

The residual is posted to the market’s named funding-residual account. It is not hidden in a trader balance or silently removed from the ledger.

Each funding interval has a unique identity. If the oracle inputs are invalid, market positions do not balance, or any payment cannot settle, the complete interval is rejected rather than applying payments to only some accounts.