Variation Margin
Why is there no margin call?
Because CRX clears profit and loss continuously instead of waiting for a breach. Variation margin (VM) moves the mark-to-market between the two parties every cycle, from posted collateral, authorized by on-chain proof. There is no moment where the contract phones a party and asks for funds. The collateral is already there; the contract moves it.
This is the central design choice. A margin call is a request a party can fail to answer. CRX removes the request.
What are the two kinds of margin?
| Initial margin (IM) | Variation margin (VM) | |
|---|---|---|
| Purpose | the buffer against a gap | clears the daily P&L |
| Sized to | a % of notional | the mark move |
| Where it sits | your SCA (segregated, per relationship) | lands in the winner's general balance |
| When it moves | re-trued once a day | every VM cycle |
Two terms, defined once:
- SCA — Segregated Collateral Account. Your collateral inside one Master Agreement. It holds only initial margin, never accumulated P&L.
- General balance. Your free, global margin — the shared backstop across every agreement you hold. VM lands here.
How does variation margin work?
The loser pays from its SCA; the winner receives into its general balance. So an SCA never swells or drains with P&L — the profit is recycled out of the relationship into the winner's own backstop. A party "owes" only the VM it could not pay.
The daily cycle has two phases:
computeVMsnapshots the mark and stamps the time.applyVMsettles at that snapped mark within a 5-minute window, then re-trues each side's SCA toward its IM target.
A second same-day applyVM reverts — re-truing happens at most once per day.
How is initial margin sized?
IM is a percentage of notional — asymmetric, with a separate rate for the long and short side — and independent of the entry price. As the mark moves, the target drifts, so the SCA is re-trued toward it once per day inside the VM cycle:
- Target above the SCA (under-margined): top up from your general balance, capped at what is there. If general can't cover, the top-up is partial — no revert — and the gap surfaces to the default cascade.
- Target below the SCA (over-margined): refund the exact excess to general.
Deallocation is exact and loop-free. Free margin is SCA − requiredIM, read from a running sum, with no iteration over positions.
What happens if a party can't pay?
The unmet VM becomes a debt the party owes its counterparty. If a party is globally short across all its agreements, that is an event of default, and the cascade runs. See Liquidation & Default Waterfall (~5 min).
Next: CSA & Dual Collateral (~4 min) — what the margin is posted in, and how it is valued.