The Risk Engine
Automated close-out
The risk engine is the set of smart contracts that watch every position's backing and close one out when its collateral fails. One policy applies to every firm, and it runs as code: no desk, no discretion, no negotiation. The engine stays dormant while a position is healthy, and acts only when the backing fails.
Close-out at the mark
A failed position closes at the same neutral mark that valued it all along, never a counterparty's valuation. The close-out runs from the failed side's own initial margin: the counterparty is paid in full and in cash, and any remainder returns to the failed side. The close and the payout clear in one transaction.
Position isolation
A close-out reaches only the one position that failed. Every other position the firm holds keeps running on its own collateral. A failure on one trade is never a failure across the book.
No mutualised loss
Collateral backs only its own trade. There is no shared loss fund and no contagion, and one firm's failure cannot reach another's positions. The book stays verifiably net-0.
- The one residual is gap risk — a market move past posted margin in a single step.
- It is bounded — per-pair margin floors cap how far a price can run before margin covers it.
- It is priced in — each side's margin carries the cost of that bound.
A clearing house mutualises a failure across its members. The risk engine isolates every failure to its own collateral, and is not a clearing house.