The Risk Engine

A close-out is the forced ending of a position. The risk engine runs it: the position closes at the oracle mark, settles from the collateral behind it, and the rest of the firm's book runs on untouched.

What is the risk engine?

The smart contracts that monitor every position's collateral and execute close-outs when backing fails. There is no risk desk and no discretion: one policy applies to every participant, and it runs as code.

The engine stays dormant while the margin engine manages the everyday. It acts on two triggers, covered in The Margin Engine (~3 min): a cure window that expires unmet, or a move through the maintenance margin — whichever comes first. The margin engine manages the position; the risk engine ends it.

What happens in a close-out?

The position closes at the oracle mark — the same neutral price that marked it all along, not a dealer's valuation. The loss is settled from the initial margin the closed-out side posted to that position: the other side is paid in full and in cash, and any remainder returns to the closed-out side. Everything clears in one transaction.

A close-out is confined to 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.

What does a close-out reach?

No other firm, and no shared pool. A firm's collateral backs only its own trades: there is no mutualised loss fund, and no participant's failure can reach another's positions or collateral. Every other participant's access stays exactly as it was.

This is the difference between CRX and a clearing house: a clearing house mutualises a failure across its members, and CRX does not. CRX bears any residual loss beyond the closed-out position's collateral, with ISDA recovery as the legal claim.

The full procedure and the payment order are on-chain code anyone can read and verify: Contract Documentation (~5 min).