Margin

Every position on CRX is collateralized on-chain. Margin is managed in three parts: initial margin, posted up front and locked for the life of the trade; variation margin, settled continuously as the market moves; and maintenance margin, the minimum balance an account must hold. Requirements are computed continuously and netted across an entire portfolio.

Initial margin

The margin engine locks initial margin (IM) from the participant's margin account when a position binds. IM covers the cost of closing out the portfolio if its holder defaults.

The requirement is sized to the volatility of the currency pair, calibrated to a value-at-risk measure over a 5-day period of risk at a 99% confidence level. Across a portfolio, the requirement is netted dynamically, based on scenarios that reflect stressed historical periods, position concentration, and volatility. A participant's total requirement reflects the risk of the book as a whole.

• Held in reserve: IM stays locked, separate from variation margin, untouched for the life of the trade.
• Never reused: the network never lends or re-pledges IM, and no other participant's failure can reach it.
• Released on close: when the position closes, IM returns to the margin account in full. Profit and loss settles through variation margin.

Variation margin

Variation margin (VM) is the continuous settlement of a position's profit and loss. As market rates move, the margin engine marks the position against a forward rate feed for its pair and transfers the change in value from one participant's margin account to the other's.

When a position moves against a participant, the margin engine draws the loss from the margin account's available balance. A routine move settles entirely from posted collateral, never a fresh margin call. When the balance falls short, the engine opens a cure window.

The cure window

When the margin account cannot cover a position's variation margin, the margin engine opens a 48-hour cure window. The participant can post fresh collateral to cover the shortfall at any time, and covering it before the window closes keeps the position open. If the window closes unfunded, or the account falls below its maintenance margin first, the risk engine closes the position out.

Maintenance margin

Maintenance margin (MM) is the minimum balance a margin account must hold, calibrated to the expected replacement cost of the portfolio. An account whose balance falls below the threshold enters close-out (~2 min).