Funding rate arbitrage across venues: what survives the costs

Whether you can run this at all

This strategy requires leveraged positions open simultaneously at two venues, which raises the regulatory bar rather than lowering it.

UK retail consumers cannot lawfully be sold crypto derivatives — the FCA prohibition has been in force since 6 January 2021 — so both legs are out of reach. US retail is not served by the offshore venues where these spreads exist. In the EU, crypto derivatives fall under MiFID II, and running two legs means satisfying the rules that apply to each venue.

An offshore venue accepting you where your regulator does not is not a workaround. It means neither leg carries the protections a domestically authorised firm would owe you.

• FCA Financial Services Register

What the trade is

Funding on a perpetual is a recurring transfer between longs and shorts. The same contract frequently funds at different rates on different venues, because the two order books carry different participants and different positioning.

The trade is to **short where funding is highest and go long where it is lowest, at equal notional on both legs**. Equal notional is what cancels the price move: in theory you carry no directional exposure and collect the difference between the two rates.

"In theory" is doing real work in that sentence.

The gross spread is not what you earn

An annualised spread is a return on **one leg's notional**, not on the capital you committed. How far apart those two numbers sit depends on your leverage.

Commit 10,000 USDT, split evenly across two legs at 2x: each leg carries 10,000 USDT of notional. A 20% annualised spread earns 20% of 10,000 — 2,000 a year — which against 10,000 of capital is 20% annualised.

At 4x each leg carries 20,000 of notional and the return on capital becomes 40%. Leverage scales the return, and scales the liquidation probability with it — and a liquidation destroys the neutrality the whole trade depends on.

Fees are charged four times, not twice

The most commonly omitted cost. Two positions to open and two to close is **four fills**.

At 0.05% per fill that is 0.2% of notional. Against a 20% annualised spread, 0.2% consumes roughly 3.65 days of carry — meaning a position closed inside four days has lost money regardless of how attractive the headline rate looked.

This is why break-even days matter more than the annualised figure. The calculator here charges all four fills and reports net rather than gross:

• Net return and break-even

Three things that actually lose money

**Rate reversal.** Funding is not fixed; it is repriced at every settlement. A 20% spread at entry can be 5% at the next settlement, or inverted. The four fills are owed either way.

**One leg liquidating.** Equal notional only cancels price risk while both legs are alive. On a large one-directional move the losing leg can be liquidated first, leaving a naked directional position — with the full directional risk restored at the worst possible moment. This is why high leverage is particularly dangerous here: it scales the return and the liquidation probability together.

**Transfer latency.** The legs sit at different venues, so topping up margin means a withdrawal, a confirmation and a deposit. During volatility that round trip can take tens of minutes, and liquidation does not wait. In practice both legs need far more buffer than the theory requires.

Three things to settle before opening

The first two are calculable. The third can only be established by testing withdrawals and deposits yourself — which is one of the items this site still lists as pending.

• Whether your intended holding period comfortably exceeds break-even
• How far each leg's liquidation price sits from spot, and whether that distance survives one violent move
• How much buffer margin sits on each side, and how long a cross-venue transfer actually takes
• Live funding rates and spread
• Check both legs' liquidation distance

This is not risk-free arbitrage

Arbitrage in the strict sense locks a spread with no risk. This does not. It carries liquidation risk, rate-reversal risk, counterparty risk at two venues, and transfer-latency risk. "Delta-neutral carry" is an accurate name for it; "risk-free arbitrage" is not.

Any description of this trade as risk-free has omitted at least one of the three failure modes above.

Risk

Leveraged trading can lose your entire deposit. Funding rates move constantly, so any specific number is stale on arrival — use the live board. Nothing here is investment advice.