The goal of BitMEX swap products is to offer a non-expiring leveraged trading product that closely tracks the price of the underlying asset. The exchange of interest payments between longs and shorts helps to anchor the swap price close to the spot price.
However, recently our Bitcoin / USD swap product XBTUSD, has been trading at a large premium to spot. This means that the Bitfinex USD and XBT lending rates do not accurately reflect the market.
In order to anchor the swap price to the spot price, the funding rate charged each 8 hours will include the outright premium over spot, or discount below spot, that the swap trades at on the open market. This premium is measured by observing the previous 8 hour time weighted average difference between the swap and the spot market.
If the Bitfinex lending rates are lower than the premium the swap traded at over the past 8 hours, the funding rate will be increased to the level of the premium.
The funding rate published at 12 June 2016 12:00 UTC is the first to incorporate the new changes. The rate is predicted to be 0.43% and will be charged at 20:00 UTC.
For a more in-depth explanation of how the premium index works, please read the Swaps Guide.
We apologize for the sudden nature of this change, which is was deemed necessary due to the very high premium trading on XBTUSD, which causes significant difficulty in filling large liquidations. When the market settles, we expect that this change will be rarely triggered as the funding rates much more accurately reflect demand during those times.