Margin & default protection
Who posts margin, and who pays whom?
Both sides post initial margin, set in the quote you both sign. You set the rate — per client, and it can differ for the two sides. The contract enforces one thing about it: it is collateral, never credit.
Read the table down your own column.
| Initial margin — at bind | Variation margin — while open | If the other side defaults | |
|---|---|---|---|
| Taker | posts the rate set in the quote | pays as the rate moves against it | loses its own estate; never touches your margin |
| You — the maker | post your own side's rate | pay as the rate moves against you | paid in full from the taker's estate |
That is the whole answer. The rest of this page is how much you set, where it sits, and what runs the default.
Where does my margin sit?
In a segregated account, one per taker: the SCA. It is non-rehypothecable. CRX does not lend it, reuse it, or net it against another counterparty. It moves only on on-chain proof.
Margin sits locked in the contract and unlocks on only two events:
- Variation-margin event — the daily mark moving collateral between the two parties.
- Close-out netting event — default or expiry, positions netted to one number and settled.
Therefore: no per-taker credit check, and no tri-party custodian to appoint or pay. The contract is the custodian; the release rules are the same for everyone.
How much do I set, and why is it my edge?
You set it — a percentage of notional, written into the quote as imLongBps / imShortBps, one rate per side. It is segregated per client: each taker holds its own account and its own terms, so what you ask one client never touches another. CRX re-trues it toward the moving mark once a day.
Because you set it, margin is your competitive lever, not a fixed cost:
- Ask for more — overcollateralize. A riskier client, or a gappy pair, can carry a higher rate.
- Offer a better rate. A client you trust can carry a tighter one. That is how you win the trade — on terms, not on waived credit.
Size it to one thing — how far the price can move before a defaulter's collateral runs out during close-out:
| Pair type | Why | Rate to set |
|---|---|---|
| Calm, continuously-marked | CRX marks on the Pyth EMA and liquidates in hours, not days | ~1–2% |
| Gappy or managed currency | can devalue in one step; FX sessions close nights and weekends, when no liquidation runs | higher — e.g. USD/PHP ~12%, USD/INR ~8% |
These are sizing guidance, not a contract floor — the rate that protects you is the one you write into the quote. And the collateral you ask for need not sit dead: it can be a yield-bearing token, so the client earns while it stays locked (below). Asking for collateral costs the client less than it looks.
A bank waves a trusted name through at zero and prices the credit into its spread. You do not. You set a collateral level per client — lower for the ones you trust — but it is always collateral, never credit.
Why isn't this the SIMM number my dealer desk knows?
Because SIMM is the off-chain dealer standard, and CRX does not use it. On-chain there is no name to waive a charge for, so the rate is simply the one you set in the quote — the market-risk number above — posted by both sides.
Off-chain, mandatory initial margin depends entirely on who the two parties are, and it only ever bites when a swap dealer (SD) is on one side:
- SD ↔ SD, or SD ↔ a large financial user (≥ $8B): two-way mandatory.
- SD ↔ a smaller financial user (< $8B): one-way, negotiated.
- SD ↔ a commercial (non-financial) user: exempt.
- No swap dealer on either side: nothing is mandated. The parties set the margin themselves.
When it is mandatory, the amount is computed by ISDA-SIMM, the Standard Initial Margin Model. SIMM sizes a near-worst-case move over a 10-day horizon from the trade's risk sensitivities — not a flat percentage. For a plain NDF the only risk is FX delta, so the margin is the delta times a per-currency risk weight. That weight is why two pairs of the same size post different amounts:
| Pair | SIMM volatility group | FX risk weight | Initial margin on $1M |
|---|---|---|---|
| USD/PHP | Regular | ≈ 7.4 | ≈ $74,000 (7.4%) |
| USD/BRL | High-volatility | ≈ 10.3 | ≈ $103,000 (10.3%) |
The driver is the currency's risk, not the size of the trade.
These are single-trade, dealer-case figures, illustrative only. A real book nets offsetting positions down; ISDA recalibrates the weights twice a year. CRX does not charge them — the rate is the one you set in the quote, sized to the close-out horizon. SIMM is the reference you can size against, not the on-chain charge.
Can my margin earn yield while it's locked?
Yes — and this is why asking a client for collateral hurts less than it looks. Margin sits in the SCA for the life of the trade, but it need not sit dead. Posted in sUSDS — a token that pays about 5% a year — the margin earns while it stays locked. The collateral you require becomes the client's working capital, not a dead cost.
| Collateral | Yield | Counted as |
|---|---|---|
| USDC | none | 100% of face |
| sUSDS | ~5% / yr | 98% of face (200 bps haircut) |
The yield works for both sides: your posted margin earns, lowering your funding cost so you quote tighter; the taker's yield is its own and offsets its cost. Both come out ahead, and the spread never has to move.
Over a 30-day tenor the yield runs around 2 bps off the cost. A longer tenor or larger margin widens it.
What happens if the taker can't pay?
The contract removes the taker automatically, at the margin line, before the loss reaches you. You never chase a taker, send a margin call, or file a claim.
- Variation margin debits the loss. As the rate moves against the taker, the loss is taken from its general balance — its free wallet inside CRX. No notice.
- Default check sweeps. If the general balance cannot cover the call, every one of the taker's SCAs is marked at one fresh price and its profit and loss collected at once.
- Removal. Still short after the sweep, the taker loses account access and enters the default procedure. Its position is auctioned to another maker, and it is paid out of its own estate.
A taker can only touch your collateral after its own deposit, general balance, and the guarantee fund are gone — and removal happens long before that line.
This is solvency-based, not behaviour-based. CRX removes a taker that runs out of collateral. It does not score, rank, or ban takers for anything else.
In a default, who gets paid first?
The defaulting taker is paid out of its own estate, never from your collateral: its deposit first, then its general balance, then the CRX guarantee fund.
The fund is CRX's own money, not a member pool. In the MVP it holds a $1 seed.
What sets the settlement price?
One Pyth EMA. The same number marks the trade and settles it. A moving average cannot be moved by a single print. There is no EMTA fixing.