> For the complete documentation index, see [llms.txt](https://docs.carbon.inc/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.carbon.inc/tradfi/what-are-tradfi-pairs.md).
# What are TradFi Pairs?
Crypto traders know perpetuals. CFDs are what traditional finance uses to do the same job: speculate on the price movement of an asset, with leverage, without owning it.
The two instruments fit different markets. Perps are purpose-built for 24/7 crypto with deep on-chain liquidity, and they work well there. CFDs are purpose-built for TradFi markets (stocks, forex, indices, commodities), where markets have defined hours and liquidity lives off-chain at regulated venues. Carbon runs both, from the same wallet and the same USDC balance.
### TL;DR
* A CFD (contract for difference) is an agreement between a trader and a counterparty to exchange the price difference of an asset between open and close. You never own the underlying.
* On Carbon, the counterparty is a solver that hedges your position 1:1 through an institutional TradFi broker. The price you trade against is the real market's price.
* Perps fit crypto. CFDs fit TradFi markets. Synthetic perps on TradFi assets drift from the real market during off-hours, carry funding rates unanchored from real borrowing cost, and cap liquidity at on-chain pool depth. CFDs solve all three structurally.
* Launching with 200 markets across stocks, forex, indices, and commodities, with new markets added every week. Self-custody, no KYC, settled on-chain in USDC.
* Every TradFi position is isolated per market. A loss on one market cannot cascade into any other position in your account.
* Market hours apply. TradFi markets follow the trading hours of their underlying exchanges.
### Perps vs TradFi in 30 seconds
Both let you go long or short with leverage without owning the asset. The difference is where the price comes from, where the liquidity comes from, and how the holding cost is calculated.
| | Perpetuals | TradFi |
| ---------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------------------------------- |
| **Mark price** | Set by long/short skew on the venue; drifts from the index | Tracks the real market price from broker feeds |
| **Funding / holding cost** | Set by open-interest skew; can spike to triple digits when one-sided | Reflects the real cost of financing the position; stable, benchmark-anchored |
| **Liquidity source** | On-chain order book or pool; only as deep as what's staked on the venue | Existing off-chain markets; the depth of the real venue |
| **When the underlying market is closed** | Unanchored; can drift on skew and oracle lag | Position frozen; reprices to the real market at next open |
| **Best for** | 24/7 crypto pairs | Stocks, forex, indices, commodities |
Perps are a crypto-native primitive that works when the underlying market is also crypto-native. CFDs are the institutional primitive for everything else.
### Why Carbon TradFi, not synthetic equity perps, for TradFi markets on-chain
Bringing TradFi markets on-chain through derivatives can be approached two ways.
**The synthetic equity perp approach** replicates the underlying's price using on-chain oracles and the open-interest mechanics borrowed from crypto perps. The funding rate floats on long/short skew, not on the real cost of holding the asset. No real hedge sits behind the position. For crypto, this works. For stocks, indices, and commodities, it introduces three structural problems:
* **Off-hours pricing drifts.** When the underlying market is closed, nothing anchors the mark price to reality. It floats on skew and can liquidate traders on synthetic moves that have nothing to do with the real asset.
* **Funding bears no relationship to real borrowing cost.** A trader paying 150% annualized to hold a stock perp is paying for on-chain skew, not the economics of holding the stock.
* **Liquidity is capped by the on-chain pool.** The S\&P 500 is effectively infinite-liquidity; its on-chain perp can still be thin.
**The Carbon TradFi approach** hedges every position 1:1 through an institutional TradFi broker in the real underlying market. What that changes:
* **Liquidity scales with the real market**, not an on-chain pool. If there is liquidity in Apple globally, there is liquidity in Apple on Carbon.
* **Pricing is anchored to the real market** during trading hours. The mark price is the market price.
* **Holding cost is economically meaningful.** It reflects the real cost of financing a leveraged position, anchored to benchmark rates, rather than triple-digit skew-driven funding.
* **Corporate events are handled with standard institutional mechanics**, because the position is a real CFD contract behind the scenes.
CFDs are not a new invention. They are the standard way traditional finance lets traders speculate on price, over **$1.5 trillion in daily volume** across brokers worldwide. Carbon's contribution is bringing the instrument on-chain at the execution quality serious traders expect.
### How TradFi Assets work
When you open a TradFi position, you enter a contract with the solver to exchange the difference in an asset's price between open and close.
* Long, price rises: the solver pays you the difference.
* Long, price falls: you pay the solver the difference.
* Short: the reverse.
You never take ownership of the underlying. No share certificate, no commodity delivery, no currency conversion. You trade the price movement, collateralized in USDC, settled on-chain.
### How TradFi on Carbon works
TradFi use the same Automated RFQ (ARFQ) execution as crypto perps: you post USDC as collateral, the solver streams a live quote, you accept, and the solver fills and hedges the trade in real time. Same wallet, same account.
Three things differ from crypto perps:
* **Margin is isolated per market.** Each TradFi market has its own margin pool, separate from every other TradFi markets and from your crypto book. If your AAPL position is liquidated, it cannot touch your TSLA position, your EURUSD position, or your crypto. Multiple positions on the same asset share that market's pool, so you can scale in and out of one view. This is not portfolio cross-margin. See Trading basics for the margin mechanics.
* **Market hours apply.** TradFi markets follow their underlying exchange's hours, not 24/7. When the market closes, your position freezes (no trading, no drift, no liquidations) and reprices to the real market at the next open. See Trading hours and sessions.
* **Holding cost reflects real financing.** The TradFi overnight rate is benchmark-anchored and stable, not the skew-driven funding used for crypto perps. It accrues continuously, including weekends. See TradFi fees and funding.
Everything else (liquidations, take-profit and stop-loss, USDC settlement) works the same as Carbon's crypto markets.
### What you can trade
Carbon launches with 200 markets across four asset classes, and new markets are added every week:
* **Stocks** - equities and ETFs
* **Forex** - major, minor, and exotic currency pairs
* **Indices** - major global indices (S\&P 500, Nasdaq 100, DAX, Nikkei 225, and more)
* **Commodities** - gold, silver, oil, natural gas, and more
Full breakdown on TradFi markets and coverage. Every position is collateralized in USDC, settled on-chain, and hedged 1:1 through the solver.
### What makes Carbon's TradFi different
* **Self-custody.** Collateral stays in your wallet until a position opens.
* **No KYC.** Permissionless access.
* **One wallet, isolated risk.** Trade crypto and TradFi from the same USDC balance, with each TradFi market's margin isolated from the rest of your book.
* **Real hedging.** Every position is hedged 1:1 through an institutional TradFi broker, so liquidity and pricing track the real market.
* **On-chain settlement.** Every position and settlement is verifiable on-chain.
### Dividends and corporate actions
For long positions on dividend-paying stocks, your account is credited with an equivalent cash adjustment on the ex-dividend date; short positions are debited. Stock splits, mergers, and rights issues are reflected in TradFi position sizes and prices so the contract tracks the true economic value of the underlying throughout its lifecycle. These adjustments are handled automatically at the solver level.
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