Swaps

Swaps are a linear derivative instrument designed to track the total return of an underlying asset. Swaps source liquidity from traditional financial institutions to offer deeper liquidity and flatter funding rates than perps. They are similar in many ways to perpetual futures, but differ in some key areas. A comparison table is given below:

Swap

Perpetual Future

Instrument Type

Linear derivative

Objective

Seeks to track the total return of an asset over time

Seeks to minimize the tracking error between the perp price and the underlying index price

Settlement Asset

USDC

Index Price

The price of the underlying asset; used as a reference price only and serves no purpose otherwise

The price of the underlying asset; used to compute the funding rate. The funding formula encourages the mark price to follow the index price

Leverage

Yes

Counterparty

Traded bilaterally

Often centrally cleared on an exchange

Funding

Real traditional-market financing costs (e.g., benchmarked to SOFR for USD indices)

Highly variable and determined by supply and demand

Trading Hours

To start, markets will not be 24/7 and will have open / closed hours. Over time markets will extend trading hours to 24/7

24/7

Source of Liquidity

TradFi institutions

Crypto exchanges

Expiry

Perpetual

Dividends & Cash Adjustments

Yes

Yes (on Variational but not generally)

Margin

Isolated only until 24/7 trading is available

Isolated or cross margin

Swaps Funding

Swaps accrue funding once per day, applied at the market's daily close (17:00 ET, Monday to Friday) on positions held through the close.

Funding rates are set per market and reflect the real cost of financing the underlying asset in traditional markets:

Equity indices — the overnight interest rate of the index's currency (e.g., SOFR for USD indices), adjusted by a spread.
FX — the overnight interest-rate differential between the two currencies, adjusted by a spread.
Precious metals — the implied cost of borrowing or lending the precious metal against USD overnight.
Other commodities — the daily carry of the underlying futures curve, which can be positive or negative depending on contango or backwardation.

Long and short rates are published separately and are generally asymmetric. Typically, longs pay funding and shorts receive it, but either side can pay or receive depending on market conditions — for example, longs earn funding in a commodity market in backwardation.

These rates are derived from the actual financing terms Variational receives from its traditional-finance liquidity partners, keeping swap funding anchored to real market rates rather than the supply-and-demand dynamics of perp funding.

Because the underlying markets are closed on weekends, one funding payment per week is tripled to cover the weekend days: on Friday for equity indices and commodities, and on Wednesday for FX and precious metals (following those markets' T+2 (two business days after the trade date) settlement convention). Similarly, the funding payment before a market holiday may incorporate the upcoming closed days. Each market's current rates and funding schedule can be viewed by hovering over the funding rate in the app.

The Secured Overnight Financing Rate (SOFR) is a broad benchmark interest rate for U.S. dollar-denominated loans and derivatives. It reflects the cost of borrowing cash overnight backed by U.S. Treasury securities as collateral.

Dividends

Qualifying markets whose underlying assets pay dividends pass them through: long positions receive the dividend amount and short positions pay it. Dividends are applied at the close of the last weekday before the ex-date. Note that payouts may be subject to applicable withholding taxes.

For index swaps, dividend adjustments occur whenever underlying constituent stocks pay dividends — so they typically arrive as small, frequent payments or charges throughout the year rather than lump sums.

Closed Hours

Swaps currently do not trade 24/7, often closing overnight and on weekends and holidays. Trading is paused while markets are closed; market/limit/trigger orders, TP/SLs, and liquidations will not process until the market is reopened.

The standard open hours (excluding holidays) for swap markets are listed below.

Market

Standard Open Hours

XAU