Basis-Only Funding Is Not Dividend Fair: Settlement Design in Crypto Equity Perpetuals
Why crypto exchanges shortchange traders who hold stock futures through dividends
When crypto exchanges offer perpetual futures contracts on dividend-paying stocks, they use a funding mechanism based on price differences that fails to account for dividends. Traders who hold these contracts through a dividend payment get shortchanged — they bear the stock's price drop on the ex-dividend date but never receive the cash dividend itself. The paper shows this happens because the standard funding system treats crypto assets and real-world assets identically, missing a crucial distinction: for stocks, fairness requires a discrete payment (an "event credit") at dividend time, not just a continuous funding stream.
Traders using these perpetual futures effectively lose money compared to owning actual stock. One exchange tested in the study does post the required dividend credit, while standard ones don't — meaning the same trade produces different outcomes across venues. As crypto exchanges expand into offering contracts on dividend-paying assets, this funding design flaw creates real financial harm, incentivizing traders to either avoid these contracts or migrate to venues that properly handle dividends.