The dual-price mechanism include: 1. The mark price (fair price) 2. The last traded price
What is the mark price?
Mark Price = Index Price + Funding Basis
Mark price can effectively avoid large deviation between the price of contract market and the spot price, which is caused by the lack of contract market liquidity. It provides a fair and transparent trading environment.
Two main functions of the mark price:
- To calculate the unrealized profits and loss (PNL)
- As the trigger for liquidation
What is the index price?
The index price is calculated from the latest market prices of the three main spot exchanges (Bitstamp, Coinbase Pro, Kraken).
BitForex uses a dual price mechanism to protect the fairness of the contract market and avoid the risk of a trader's position being liquidated due to abnormal market volatility.