Categories: Clearing and settlement

Participants settle on a post-trade basis through the T+1 clearing and settlement cycle of RULEMATCH. The system performs a multi-lateral netting of all trades under the same trading cycle, leading to greater capital efficiency for participants.

Post-trade settlement is strictly based on the principle of Delivery vs Payment (DVP), which substantially reduces the uncertainty linked to settlement and counterparty risk.

RULEMATCH never acts as a counterparty within the entire clearing and settlement process. All transfers initiated at the end of each cycle occur between individual blockchain addresses and fiat accounts, therefore never leading to pooling of funds or exposure to the balance sheet of RULEMATCH.

Trades executed off-order book may also be reported and settled through RULEMATCH, given that both parties are participants in the platform, in order to benefit from multilateral netting with the rest of the on-order book trading flow, as well as a single settlement transaction per cycle.

The completion of the closing auction (21:30 UTC) signals the end of the current RULEMATCH trading day, at which point the corresponding clearing cycle begins. RULEMATCH discloses each participant’s bilateral entitlements and obligations. In addition, each participant is calculated the sum of all bilateral entitlements (positive sign) and obligations (negative sign), in order to reflect a multilateral net position per asset. The negative net positions per asset (clearing obligations) reflect the assets to be submitted by the participant.

All participants undertake to reserve their clearing obligations at the latest by the Clearing Deadline (17:00 CET of the next day). Once all clearing obligations are fulfilled, settlement is facilitated by RULEMATCH using an algorithm that minimizes the number of settlement transactions between participants. Participants whose transfers are delayed must provide sufficient evidence to RULEMATCH that the transfers have been initiated. Only in this case, the Clearing Deadline may be extended up to 09:00 CET of the following day to allow for the delayed obligations to come in, at which point the settlement transfers are executed. Participants that cause delays in the settlement process are subject to penalty fees.

If a participant fails to reserve the assets of its clearing obligations by the Clearing Deadline or does not provide evidence of an executed transfer, it is deemed to have defaulted. At this point a ‘Step-In Participant’ may take over the clearing obligations of the defaulted participant in order to guarantee the multilateral settlement. Step-in participants are remunerated from the collateral of the defaulted participant. In the infrequent case of no available Step-In Participant, settlement ultimately falls back into bilateral mode, RULEMATCH facilitates a P&L (cash) settlement of the bilateral net positions among the participants, by valuing them in USD terms, and utilizing their reserved collateral to cover the resulting P&L settlements. Penalty fees for delayed or defaulting participants, as well as remuneration of their affected counterparties is governed by the rulebook of RULEMATCH.