Definition
Bilateral settlement is a model where two counterparties settle directly with each other without a central counterparty or clearinghouse intermediating. Each party bears the counterparty credit risk of the other until settlement is complete. Bilateral settlement is the default in OTC markets and in many digital asset trading relationships, particularly for large block trades. It is operationally simpler than clearinghouse-based settlement but exposes counterparties to delivery and credit risk that atomic settlement and CCP structures are designed to mitigate.
Example
Two OTC desks agree on a 1,000 BTC trade. One wires USD to the other's bank account; the other transfers BTC to the first desk's wallet. Until both legs complete, each party has counterparty exposure to the other.
How Liquid Mercury Handles This
Mercury OTC surfaces bilateral settlement workflows with full audit trail, settlement instruction tracking, and break-resolution surfaces for the operations team. Where atomic rails are available, the platform can route to those instead.