Cross-exchange funding-rate arbitrage

A common setup goes long on the lower standardized rate and short on the higher standardized rate, with notionals matched as closely as contract specifications allow.

Equal notionals reduce directional exposure but do not eliminate it. Mark prices, contract multipliers, basis, fill timing, and collateral differ across venues, so the two legs can diverge during a fast market.

The ranking checks each pair rather than excluding every hourly quote. 1h can pair with 1h / 4h; 4h can pair with 1h / 4h / 8h; 8h can pair with 4h / 8h. Only direct 1h-versus-8h candidates are excluded.

Allowed pairs use a common eight-hour observation window, but shorter intervals can still reset before the window ends. The displayed spread is not locked return.

Opening and closing both legs creates four executions. If each execution is modeled at 0.04% in fees plus 0.02% in slippage, the simplified round-trip cost is 0.24% before basis and funding-transfer effects.

At a gross 0.020% per eight hours, roughly twelve similar windows would be needed just to cover that simplified cost. The current spread is therefore a screening input, not an executable return.

Different mark-price rules, contract multipliers, liquidation systems, and settlement times can make equal notionals drift apart.

Exchange failure, withdrawal suspension, margin imbalance, and a rapid funding reversal can turn a nominal arbitrage into a loss.