Roxom’s funding rate is designed to reflect two components:
  1. Interest Rate Component: This accounts for the cost-of-carry difference between holding the underlying asset vs holding BTC. In Roxom’s case, contracts are BTC-margined, so think of it as the difference in financing rates for the two sides (asset vs BTC). By default, Roxom sets a small baseline interest rate factor of 0.01% per 8 hours (this can be adjusted if needed for different assets or market conditions, but 0.01% is the default).
  2. Premium/Discount Component: This is the primary driver of the funding rate. It measures the difference between the perpetual’s market price and the underlying index price. If the perpetual is trading higher than the index (i.e. at a premium), the funding rate will be positive (longs will pay shorts). If the perpetual is below the index (at a discount), the funding rate will be negative (shorts pay longs). The magnitude of this component is essentially the percentage price discrepancy. For example, if the perp is 1% above the index, this component contributes roughly +1% (annualized to the period) to the funding rate for that interval.
Roxom imposes a cap on the funding rate to prevent it from going to extreme levels. By default, the funding rate per interval is capped at ±3%. (Specific contracts might have their own cap defined, but 3% is the standard maximum funding rate for an 8-hour period). The formula can be summarized as: FundingRate=(PerpetualPrice–IndexPrice)/IndexPrice+InterestRateAdjustmentFunding Rate = (Perpetual Price – Index Price) / Index Price + Interest Rate Adjustment *(with the result constrained to not exceed 3% or go below -3% for the period, unless an instrument specifies otherwise).