Boros, Pendle’s funding-rate trading protocol, launched Spread Markets on Oct. 15 with BTC and ETH products designed to turn the funding-rate gap between two perpetual futures venues into a single tradable position.
The new markets allow traders to take a view on whether the difference in funding rates across exchanges will widen or narrow, without opening and continuously managing offsetting perpetual futures positions on both venues. That structure gives traders a direct way to trade a cross-venue market imbalance that has traditionally required multi-leg execution and active rebalancing.
Spread Markets begins with Bitcoin and Ether pairs. Each instrument tracks the difference between the funding rate on one venue and the rate for the same asset on another venue. If BTC perpetual funding is annualized at 20% on one exchange and 8% on a second exchange, for example, the product’s floating rate reflects the resulting 12-percentage-point annualized gap.
A fixed-versus-floating trade on funding gaps
Perpetual futures do not expire, so trading venues use periodic funding payments to keep contract prices broadly aligned with the spot market. When demand to hold long positions is stronger, longs generally pay shorts; when short demand dominates, the direction can reverse. Funding rates can vary sharply from one venue to another even when the underlying asset is the same.
Boros packages that variation as a swap-like trade between a fixed rate and a floating funding spread. At entry, a trader locks an implied annualized rate. At settlement, the position is valued against the average funding-rate difference actually realized over the holding period.
A trader going long the spread benefits if the realized funding gap exceeds the implied rate set at entry. A short position benefits if the realized gap falls below that rate. The profit and loss calculation is based on the difference between the fixed entry rate and the eventual floating spread, rather than a direct transfer of funding payments from two exchange accounts.
That distinction changes how the strategy is used. A trader can treat the funding-rate difference as its own underlier, instead of holding long and short BTC or ETH perpetual contracts. The approach can reduce direct exposure to the asset’s price movement relative to a paired-perpetual strategy, although it does not remove trading risk. Funding gaps can move quickly as leverage, sentiment and positioning shift on either venue.
Three-leg structure can lock a rate, with added execution risk
Boros also presents Spread Markets as one component in a more complex structure intended to convert a variable funding spread into a fixed-rate outcome.
Using the BTC example, a trader could short a BTC perpetual contract on the venue with higher funding, buy an equal-sized BTC perpetual on the venue with lower funding, and short the related Boros Spread Market. The two perpetual positions are intended to offset much of the asset-price exposure, while the Boros position offsets the variable funding-rate spread.
The result is designed to resemble a fixed-rate trade: the trader receives the higher funding rate through the short perpetual position, pays the lower rate on the long position, and uses the Spread Market to hedge the changing difference between the two.
Boros marketing materials cite examples of fixed returns in a 25% to 35% range. Those figures are not presented as net performance after trading fees, slippage, collateral costs, liquidations or the practical challenges of maintaining three linked positions. The rate available to a trader depends on the implied level at entry, the duration of the position and market conditions across the underlying venues.
The product therefore creates a cleaner interface for a strategy, but it does not turn funding arbitrage into a passive yield product. A position that appears largely price-neutral can still produce losses if one leg is liquidated, if the underlying markets become difficult to trade, or if the funding spread moves sharply before the hedge is established or adjusted.
Funding spreads can collapse or reverse
The main risk sits in the behavior of the spread itself. Cross-venue funding differences can widen during bursts of speculative demand, but they can also compress rapidly once positioning changes or traders pursue the same opportunity. A positive funding spread can fall toward zero or turn negative, changing the settlement result for either side of the Boros market.
Liquidity conditions introduce another layer of risk. The three-leg fixed-rate construction relies on reliable execution in two perpetual markets and in Boros itself. During periods of thin order books or abrupt price moves, a trader may struggle to enter, close or rebalance all legs at comparable prices. A delay in one market can leave the overall position exposed to BTC or ETH price moves despite the intended hedge.
Each venue also applies its own margin, liquidation and funding procedures. Extreme price volatility or disruptions at an underlying exchange can create mismatches between the legs of the strategy. A trader can be correct about the eventual funding spread and still incur losses if collateral on one perpetual position becomes insufficient before the trade reaches settlement.
Capacity may limit the most attractive rates
Spread Markets may also face a capacity constraint common to funding-rate strategies. High funding gaps often attract traders seeking to capture them. As more capital enters the trade, perpetual-market positioning can shift and the gap between venues can narrow. That reduces the fixed rate available to later entrants and can make execution costs a larger share of potential returns.
For Boros, the launch extends Pendle’s product range beyond trading yield associated with tokenized assets and into derivatives linked to perpetual futures funding. The product targets a market behavior already familiar to derivatives traders, but expresses it through a dedicated rate instrument rather than a set of manually managed exchange positions.
The design could make funding spreads easier to access and price, particularly for traders who want a defined settlement mechanism rather than continuous collection of payments across venues. Its practical appeal will depend on liquidity, execution quality and whether the market can maintain enough depth for traders to enter and exit without eroding the spreads they are seeking to trade.
To master funding-rate gaps like Spread Markets uses, explore advanced funding-rate strategies and refine your perp trading edge.
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