OKX, one of the leading cryptocurrency exchanges in the world, has announced a major update to its funding fee collection mechanism for the remaining group of perpetual futures.
Starting from January 22, 2024, the funding fee will be collected at the end of each funding period, instead of being accumulated across multiple periods.
This change will improve the accuracy and fairness of the funding fee calculation, and reduce the risk of funding fee manipulation by malicious traders.
The funding fee is a mechanism that ensures the price of perpetual futures contracts is aligned with the spot market price. When the perpetual futures price is higher than the spot price, long positions pay short positions a funding fee, and vice versa.
The funding fee is calculated based on the difference between the perpetual futures price and the spot index price, and is collected every eight hours.
Previously, OKX adopted a cross-period collection method for some of its perpetual futures contracts, which means that the funding fee was not collected at the end of each period, but was accumulated until the user closed their position or reduced their margin.
This method was designed to reduce the frequency of funding fee payments and lower the transaction costs for users. However, it also had some drawbacks, such as:
– The cross-period collection method could cause a large discrepancy between the actual funding fee and the expected funding fee, especially when the market was volatile or when the user held their position for a long time.
– The cross-period collection method could create an incentive for some traders to manipulate the funding fee by opening or closing large positions before the end of each period, which could affect the fairness and efficiency of the market.
– The cross-period collection method could increase the risk of liquidation for users who held their positions across multiple periods, as they would have to pay a large amount of accumulated funding fee at once when they closed their positions or reduced their margin.
To address these issues, OKX decided to change the funding fee collection method for the remaining group of perpetual futures contracts from cross-period collection to current-period collection. This means that the funding fee will be collected at the end of each period, regardless of whether the user closes their position or reduces their margin.
This change will bring several benefits, such as:
– The current-period collection method will ensure that the actual funding fee is consistent with the expected funding fee, as it will reflect the latest market conditions and price movements.
– The current-period collection method will eliminate the possibility of funding fee manipulation by malicious traders, as they will not be able to influence the funding fee by opening or closing large positions before the end of each period.
– The current-period collection method will reduce the risk of liquidation for users who hold their positions across multiple periods, as they will not have to pay a large amount of accumulated funding fee at once when they close their positions or reduce their margin.
The change will affect all OKX perpetual futures contracts except BTC/USDT and ETH/USDT, which have already adopted the current-period collection method since December 2020.
The change will take effect on January 22, 2024 at 04:00 UTC. Users who hold positions in any of the affected contracts are advised to adjust their margin and risk management strategies accordingly.
By changing the funding fee collection mechanism for its perpetual futures contracts, OKX aims to improve its trading environment and user experience.
For more information about OKX’s perpetual futures products and features, please visit https://www.okx.com/futures.
