Perpetual Contracts are subject to a potential “Funding Payment” at three specific times a day (the “Funding Times”). Whether a Funding Payment will occur depends on market conditions during the applicable eighthour interval (the “Funding Period”), as described below. A Funding Payment consists of the transfer of Settlement Tokens from the Derivative Wallets that hold positions on one side of the market to the Derivative Wallets that hold net positions on the other side of the market, such that either (1) holders of short positions pay holders of long positions or (2) holders of long positions pay holders of short positions.
Terms that are not defined in this Summary have the same definitions that are set forth in the Derivative Terms of Service. Please consult the Derivative Terms of Service for further information regarding those terms. This Perpetual Contract Funding Payment Summary (this “Summary”) was last updated November 13, 2019.
BFXD will execute the transfer of Funding Payments and reflect them in the Derivative Wallets of market participants consistent with the terms of this Summary, but without prior notice to market participants. Funding Payments will be made from a market participant’s Available Derivative Wallet Balance, unless it has insufficient Settlement Tokens to satisfy the Funding Payment, in which case, Settlement Tokens also will be transferred from the market participant’s Margin Collateral to cover any shortfall from the Available Derivative Wallet Balance.
The terms for Funding Payments may differ from one Perpetual Contract to another. The different terms for each Perpetual Contract are set forth in the text and tables below. BFXD may at any time, in its sole discretion, revise the parameters and terms for Funding Payments. You should review the tables below for the particular terms applicable to each Perpetual Contract in which you trade.
What market conditions require a Funding Payment to be made?
A Funding Payment will be required whenever, during any eighthour Funding Period, the “Average Spread”—the average difference between (1) the midpoint between the last posted highest bid and the lowest offer of the Perpetual Contract in the BFXD trading book (“Derivative MidPrice”) and (2) the Mark Prices—fall within a certain range as specified in Table 1.
Table 1
Range in the Average Spread that does not require a Funding Payment 
Funding Payment Cap 

Lowest Negative Average 
Highest Positive Average 

BTCF0:USTF0 
0.05% 
0.05% 
0.25% 
ETHF0:USTF0 
0.05% 
0.05% 
0.25% 
KINGF0:USTF0 
0.05% 
0.05% 
0.25% 
SMARTF0:USTF0 
0.05% 
0.05% 
0.25% 
Table 1 shows, for example, that for the Perpetual Contract on BTCF0:USTF0, an obligation to make a Funding Payment arises whenever the Average Spread is greater than 0.05% or less than 0.05%. When the Average Spread over the Funding Period is equal to or within 0.05% and 0.05%, a Funding Payment will not be required.
How is the Average Spread calculated?
With respect to the Perpetual Contract Digital Token Pairs, BFXD calculates the Average Spread using equally weighted samples consisting of the difference between (1) Derivative MidPrice and (2) the last Mark Price for every second of a Funding Period. For a second in which there is no trade, the price differential from the most recent Derivative MidPrice will be used for that second. The calculation of the Average Spread begins anew at zero at the beginning of each new Funding Period and is based exclusively on and limited to the market prices occurring during each Funding Period.
With respect to the MultiPair Index Perpetual Contract, BFXD calculates the Average Spread using equally weighted samples consisting of the difference between (1) the Derivative MidPrice and (2) the last Index Mark Price for every three seconds of a Funding Period. For an interval in which there is no trade, the price differential from the most recent Derivative MidPrice will be used. The calculation of the Average Spread begins anew at zero at the beginning of each new Funding Period and is based exclusively on and limited to the market prices occurring during each Funding Period.
The Funding Times, the length of the three Funding Periods, and the frequency of samples used to calculate the Average Spread are set forth in Table 2.
Table 2
Funding Periods and Times 
Average Spread Calculation 

Length 
End (UTC) 
Price Differential Samples to be Averaged 
Frequency 

BTCF0:USTF0 
8 hours 
0:00, 8:00, 16:00 
(Derivative MidPrice / Mark Price)  1 
Every 1 Second 
ETHF0:USTF0 
8 hours 
0:00, 8:00, 16:00 
(Derivative MidPrice / Mark Price)  1 
Every 1 Second 
KINGF0:USTF0 
8 hours 
0:00, 8:00, 16:00 
(Derivative MidPrice / Index Mark Price)  1 
Every 3 Seconds 
SMARTF0:USTF0 
8 hours 
0:00, 8:00, 16:00 
(Derivative MidPrice / Index Mark Price)  1 
Every 3 Seconds 
At a Funding Time, which Average Spread determines if a Funding Payment is required?
At a Funding Time, it is the Average Spread that BFXD published on the Site for the previous Funding Period that will determine whether a Funding Payment will be required. For example, with respect to the Perpetual Contract for the Digital Token Pair BTCF0:USTF0, BFXD will publish the Average Spread for the eighthour Funding Period of 16:00 (UTC) to 0:00 (UTC) at some point during the Funding Period from 0:00 (UTC) to 8:00 (UTC). At the Funding Time 8:00 (UTC), the Average Spread published for the Funding Period of 16:00 (UTC) to 0:00 (UTC) will determine whether a Funding Payment will be made at the 8:00 (UTC) Funding Time and the size of the Funding Payment.
Who is obligated to make and who is entitled to receive a Funding Payment?
When the applicable Average Spread at a Funding Time requires a Funding Payment to be made:
To underscore these terms, only holders who have a position on at the specific moment of a Funding Time will be (1) obligated to make a Funding Payment when one is required for their position or (2) entitled to receive a Funding Payment when their position is entitled to receive one.
How is the Funding Payment calculated – what determines its size?
Beginning October 3, 2019 at 9:00 AM UTC, Funding Payments are calculated as a percentage of the notional value of the size of a market participant’s position valued on the basis of the final Mark Price (for Perpetual Contracts on Digital Token Pairs) or final Index Mark Price (for the MultiPair Index Perpetual Contract) before the end of the Funding Period. Accordingly, Funding Payments will be calculated pursuant to the following formula:
(Position Size)*(Mark Price or Index Mark Price)*(Average Spread T1)
When will BFXD transfer the Settlement Tokens to and from Derivative Wallets to settle a Funding Payment?
BFXD will transfer Settlement Tokens to and from Derivative Wallets to settle a Funding Payment at a Funding Time.
Will trading in the Perpetual Contract be paused while BFXD transfers Digital Tokens between Derivative Wallets to settle Funding Payment obligations?
Yes. During the time period when BFXD transfers Digital Tokens between Derivative Wallets to settle Funding Payment obligations, all trade and order matching and accounting for Margin Collateral in Derivative Wallets will be paused for a period of time lasting several seconds or longer. Regular trading will resume once the Funding Payment settlement is complete. The calculation of the Average Spread will not include any pricing value for the period of time during which trading in the Perpetual Contract is paused to accomplish the settlement of Funding Payment obligations.
Can Funding Payments affect the market pricing of the Perpetual Contract?
Yes, it is possible that Funding Payments and the pause in trading of the Perpetual Contract they will require will affect market pricing of the Perpetual Contract. Examples of how this could happen could include the following, among others:
• There is a potential that market conditions relevant to the valuation of the Perpetual Contract could materially change during the pause in trading, causing market participants to commence bidding at substantially different prices after the pause; and
• It is possible that market participants may reflect and take account of any projected Funding Payment in their bids and offers and trades.
Examples of Funding Payment Terms and Conditions for the Perpetual Contract on the Digital Token Pair BTCF0:USTF0
For the Perpetual Contract on the Digital Token Pair BTCF0:USTF0, the amount of a Funding Payment will increase as the size of the Average Spread increases beyond ±0.05% up to a maximum (a cap) of 0.25% of the position notional value. This is displayed in the graph below.
The amount of a Funding Payment for the Perpetual Contract on the Digital Token Pair BTCF0:USTF0 can be calculated using the following formulas:
Average Spread 
Funding Payment 
Positive (longs pay) 
MIN(0.25%, MAX (0.00%, Average Spread – 0.05%)) 
Negative (shorts pay) 
MAX(0.25%, MIN(0.00%, Average Spread + 0.05%)) 
Examples of hypothetical scenarios of the application of Funding Payments for the Perpetual Contract on the Digital Token Pair BTCF0:USTF0.
Scenario 1: Capped Positive Average Spread
At the end of a Funding Period, Average Spread is 0.50% and the corresponding Funding Payment is:
Funding
Payment = MIN(0.25%, MAX(0.00%, 0.50%  0.05%)) = MIN(0.25%, 0.45%) = 0.25%
Longs pay 0.25% of notional position value to shorts.
Scenario 2: Positive Average Spread greater than 0.05%:
At the end of a Funding Period,
Average Spread is 0.15% and the corresponding Funding Payment is:
Funding Payment = MIN(0.25%, MAX(0.00%, 0.15%
 0.05%)) = MIN(0.25%, 0.10%) = 0.10%
Longs pay 0.10% of notional position value to shorts.
Scenario 3: Positive Average Spread less than or equal to 0.05%:
At the end of a Funding
Period, Average Spread is 0.04% and the corresponding Funding Payment is:
Funding Payment = MIN(0.25%,
MAX(0.00%, 0.04%  0.05%)) = MIN(0.25%, 0.00%) = 0.00%
No Funding Payment occurs.
Scenario 4: Capped Negative Average Spread:
At the end of a Funding Period, Average Spread is
0.50% and the corresponding Funding Payment is:
Funding Payment = MAX(0.25%, MIN(0.00%, 0.50% + 0.05%)) =
MAX(0.25%, 0.45%) = 0.25%
Shorts pay 0.25% of notional position value to longs.
Scenario 5: Negative Average Spread less than 0.05%:
At the end of a Funding Period, Average
Spread is 0.10% and the corresponding Funding Payment is:
Funding Payment = MAX(0.25%, MIN(0.00%, 0.10% +
0.05%)) = MAX(0.25%, 0.05%) = 0.05%
Shorts pay 0.05% of notional position value to longs.
Scenario 6: Negative Average Spread equal to or greater than 0.05%:
At the end of a Funding
Period, Average Spread is 0.03% and the corresponding Funding Payment is:
Funding Payment = MAX(0.25%,
MIN(0.00%, 0.03% + 0.05%)) = MAX(0.25%, 0.00%) = 0.00%
No Funding Payment is required.