Funding is the mechanism that keeps perpetual markets balanced by incentivizing traders to take positions that reduce market skew and bring the price of perp contracts close to the underlying spot price. When there are more longs than shorts, longs pay shorts. When there are more shorts than longs, shorts pay longs.

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How Funding Works

GTE uses a sophisticated funding system that’s cadence-invariant - meaning the realized funding is independent of when settlements happen. This ensures fairness regardless of timing.

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The Premium Signal

Every minute, GTE samples the premium - the difference between the mark price and index price: premium=markPrice−indexPriceindexPrice\text{premium} = \frac{\text{markPrice} - \text{indexPrice}}{\text{indexPrice}} This premium tells us how much the perpetual is trading above or below its fair value. The system maintains a rolling average (TWAP) of these premium samples (every 5-15s) over the last 60 minutes to smooth out noise.

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Funding Rate Calculation

At each funding interval, GTE calculates the funding rate using a two-step process: Step 0: Premium 
P̄_decimal = Mark / Index - 1
P̄ = P̄_bps = 10_000 × P̄_decimal
Step 1: Inner Clamp 
F_raw = P̄ + clamp(IR_int - P̄, -K, K)
Step 2: Outer Cap 
F = clamp(F_raw, -C, C)
Where:
  • P̄ = Premium TWAP (rolling average)
  • IR_int = Interest rate component (usually 0)
  • K = Inner clamp (50 bps default)
  • C = Outer cap (100 bps default)
Positive funding rate means longs pay shorts. Negative funding rate means shorts pay longs.

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Funding Accrual

The funding rate is converted to a per-second rate and continuously accrued: 
r_sec = F / T_interval
dQFI = r_sec × I × dt
QFI = QFI + dQFI
Where:
  • r_sec = Per-second funding rate
  • I = Index price
  • dt = Time elapsed since last Funding settlement
  • QFI = Quote Funding Index (cumulative)

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Account Settlement

When your position changes or funding settles, the system calculates your funding payment: 
funding_pnl = -sign(Q) × |Q| × (QFI - last_QFI)
Sign convention:
  • Long positions (Q > 0) pay when F > 0
  • Short positions (Q < 0) pay when F < 0

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Dynamic Funding Intervals

GTE can shorten funding intervals during high volatility to respond faster to market conditions. This is called a RESET.

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RESET Triggers

The system may trigger a RESET when:
  • Premium divergence exceeds certain thresholds
  • Market conditions change rapidly
  • Risk management requires faster response

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RESET Process

  1. Close the current interval early
  2. Re-seed the premium sampling if needed
  3. Start a new interval with fresh parameters
  4. Continue QFI accrual (no reset)
RESETs don’t affect your funding payments - they just change when settlements happen. The total funding over time remains the same.

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Funding Parameters

GTE uses these default parameters:
ParameterDescriptionDefaultRange
N_minutesPremium TWAP window60 minutes5-1440 minutes
T_nominalNominal funding interval3600 seconds1800-86400 seconds
T_minMinimum interval after RESET300 seconds60-3600 seconds
KInner clamp50 bps10-200 bps
COuter cap100 bps50-500 bps
The funding interval and RESET interval are admin-settable. To start, they are set to 1 hour for funding and 30 minutes for RESETs.

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Funding Examples

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Example 1: Normal Market

  • Index Price: $1000
  • Mark Price: $1006 (60 bps premium)
  • Premium TWAP: 60 bps
  • Interest Rate: 0 bps
  • Inner Clamp: 50 bps
  • Outer Cap: 100 bps
Calculation: 
F_raw = 60 + clamp(0 - 60, -50, 50) = 60 + (-50) = 10 bps
F = clamp(10, -100, 100) = 10 bps
Result: Longs pay shorts 0.1% per hour

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Example 2: High Premium

  • Index Price: $1000
  • Mark Price: $1020 (200 bps premium)
  • Premium TWAP: 200 bps
  • Interest Rate: 0 bps
  • Inner Clamp: 50 bps
  • Outer Cap: 100 bps
Calculation: 
F_raw = 200 + clamp(0 - 200, -50, 50) = 200 + (-50) = 150 bps
F = clamp(150, -100, 100) = 100 bps
Result: Longs pay shorts 1% per hour (capped at outer limit)