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Funding Payment

Every hour, traders with open long or short positions will pay each other a funding payment, depending on market conditions. If the contract price is above the index price, longs will pay shorts. If the contract price is below the index price, shorts will pay longs. The size of the funding payment is a function of the difference between the contract price and the index price, as well as your position size. This incentivizes traders to take the unpopular side of the market.

Periodic funding payments are the most common mechanism used by exchanges to do perpetual swaps. Funding payments act to converge the mark price (the price on Tsunami) and the index price (the average price from major exchanges).

An amount of funding payment is calculated using the formula:

fundingPayment=positionSizeTWAPperpetualTWAPindex24fundingPayment = positionSize * \frac {{TWAP}_{perpetual} - {TWAP}_{index}} {24}

As a rule of thumb - the higher the difference between mark price and index price, the more funding you will pay when you open a divergent position, and the more you collect opening a converging position.