Funding Rate Arbitrage (Perps)
What is Funding Rate Arbitrage (Perps)
Noon buys an asset in the spot market and shorts the same quantity through a perpetual contract. The two positions offset each other, so the strategy holds close to no directional exposure to the asset's price.
The return comes from funding. When funding is positive, perpetual longs pay shorts. Noon collects that funding on the short leg while the spot leg cancels out the price risk.
The framework is asset and venue agnostic. Noon deploys funding rate arbitrage wherever an asset and venue meet its standards for liquidity, funding, execution, custody and risk. Two deployments are currently active under this framework.
$BTC / $ETH (on Binance)
The strategy holds BTC or ETH spot and shorts equivalent exposure through the corresponding COIN-M perpetual on Binance. Returns come from positive perpetual funding.
Provider
Binance
Custodian
Ceffu
Target yield
Variable. Over the 90 days ending 19 August 2026, BTC and ETH COIN-M funding averaged approximately 6.5% and 4.7% annualized respectively, before fees and custody costs.
COIN-M perpetuals are margined and settled in the underlying asset. Gains and losses on the short closely offset changes in the spot position, which substantially reduces price-driven margin and liquidation risk.
Assets remain under institutional custody with Ceffu, whose MirrorX solution mirrors balances to Binance for trading. This reduces direct on-exchange custody exposure.
Both markets offer very high liquidity. On 19 August 2026, Binance BTCUSDT and ETHUSDT recorded approximately $709.7m and $357.4m of 24-hour spot volume, while the BTCUSD and ETHUSD COIN-M perpetuals recorded approximately $444.5m and $239.7m of notional volume with $1.08bn and $285.9m of open interest.
Noon limits positions to a small fraction of daily volume.
$HYPE (on Hyperliquid)
The strategy buys HYPE spot and shorts the same quantity through the HYPE/USDC perpetual on Hyperliquid. On Hyperliquid, funding settles every hour.
Venue
Hyperliquid
Target yield
Variable. Recent funding averaged approximately 9.84% annualized before fees.
$HYPE was selected because it combines strong funding with deep liquidity.
On 22 July 2026, $HYPE recorded approximately $72.7 million of spot volume, $407.8 million of perpetual volume and $1.33 billion of perpetual open interest.
Risk management
Noon monitors net delta and corrects position drift to keep spot and perpetual exposures matched. The trade is only held while expected funding remains positive after costs. Synchronized orders and strict delta limits reduce the temporary exposure created when one leg fills before the other.
Noon Deployment Analysis: Summary
1. BTC / ETH
2. HYPE
Return generation mechanism
The short position on the perpetural future leg (of $BTC, $ETH or $HYPE) generates the funding rate. The holders of long perp positions of these assets pay the holders of the shorts.
Documents
A full risk assessment for the Funding Rate Arbitrage (Perps) trade for the $HYPE token can be found archived in Noon's Governance Forum
Note: as Funding Rate Arbitrage (Perps) for the $BTC and $ETH tokens were among Noon's launch strategies, there was no governance vote to permit deployment into this strategy.
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