Two Fridays ago I wrote about the Options Clearing Corporation and planned to come back to who carries the risk when the middle itself fails. I held it a week to get it right, and the story kept moving in the meantime. On September 15 the Senate's motion to proceed on the CLARITY Act failed 49 to 50. Two days later the CFTC sent its own crypto market structure rule to the White House for review. Bitcoin traded down to $74,968 that afternoon and CoinGlass counted more than $665 million of liquidations in a day, and $795 million more on Monday's way back up.
Every one of those liquidations closed against somebody. The list two Fridays ago had three things an institution needs before it trades a crypto option in size: close a position with somebody other than the dealer who sold it, margin the whole book at once, and a record a compliance officer will sign. This is the fourth: a name that has agreed in advance to eat the loss.
What One Book Cost
Einar Aas traded the spread between Nordic and German power prices. He missed a margin call at Nasdaq Clearing on September 10, 2018. The next day Nasdaq declared him in default and auctioned his book off 114 million euros short of his collateral. Nasdaq's own capital went in first, 7 million euros. The other 107 million came out of a 166 million euro default fund the surviving members had paid in before the fact. None of them quit over it, because the alternative is pricing every counterparty's balance sheet into every trade.
Who Pays, In Order
The order is published in advance and does not move. Defaulter's margin, then the defaulter's own contribution to the fund, then the clearinghouse's capital, then everybody else's contributions, then assessments on the survivors. The OCC's clearing fund, sized monthly against the failure of its two largest member groups, stood at $21.9 billion at the end of 2025. October 20, 1987. Nobody on the floor was asking where the market was. We were asking which clearing firms were still good for it. The fund and the rulebook held, and it took the Fed's word that morning to make sure they did.
Crypto Stops at the Winner
A crypto venue runs two of them, and not the two you would guess. The liquidation engine takes the position over, and the shortfall goes to a futures insurance fund that Binance says is fed by liquidation fees and whatever is left over when a seized position closes above its bankruptcy price. When that fund will not cover the gap, the venue reaches for auto-deleveraging, or ADL, and closes the most profitable positions on the other side at the bankruptcy price. No assessment, no mutualized fund, nobody to call. The trader who read the move correctly pays for the one who read it wrong. A clearinghouse can reach the winners too, but only after the whole list above is spent, and only under a rule written in advance.
What ISO Is Built to Change
None of it is live yet, so what follows is the design. ISO Markets puts one prime broker between every client and every dealer. You hit the best quote and you are never facing the dealer who made it. The prime is there before the fill prints. That prime is Ripple Prime, known as Hidden Road until Ripple bought it for $1.25 billion last October. It clears more than $3 trillion a year for over 300 institutions. The design has ISO holding no asset and taking no side.
That step into the trade is what lets a position bought from one dealer be closed with another. It also changes where the collateral sits. On a venue it sits on the venue's ledger, which is how FTX customers' margin ended up as a claim in a bankruptcy, with $8.7 billion in restitution ordered in 2024, and how $1.5 billion left Bybit's wallets in one hack in February 2025. Bybit covered that one, and nothing obliged it to. On ISO the collateral stays with the client's own qualified custodian, and the prime holds a claim on it.
Margin follows the same logic. A book spread across four venues posts margin four times and gets four uncoordinated calls in a drawdown. One prime means one call against the whole book. Every quote and fill is time-stamped along the way, because the prime must book every leg.
What It Does Not Do
Two weeks ago I said a prime broker in the middle concentrates counterparty risk. A bigger name does not change that. Ripple Prime brings one balance sheet and one credit relationship in place of four exchange ledgers. Behind Ripple Prime there is Ripple Prime. If it fails, the client's positions land in an insolvency proceeding, not in a rulebook, and that is the price of one name instead of a fund. The OCC still promises more, and ISO has not printed its first trade. The right word for it is still building.
What I'm Watching
What is inside the CFTC's filing. RIN 3038-AF80 went to the White House on September 17 and stays sealed until it clears review. The SEC moved the same day, with a five-year exemption for trading tokenized stocks on-chain, and its own crypto asset rule is out for comment into October. Michael Selig posted on X that the agency was "locked in and ready to ship its rules." Custody and margin can be written into a rule. Nobody can write a default fund into existence. Somebody has to pay into it.
Whether a US clearinghouse lists an option on the coin itself. CME took its crypto futures and options to 24/7 trading on May 29 and still has not, and neither has the OCC. Until one does, the gap ISO is built for is in focus.
What DTCC's tokenization service does in October. Production trades started in July with JPMorgan, BlackRock and Goldman. A tokenized Treasury inherits a clearinghouse's waterfall. A crypto-native one gets whatever fund the exchange built.
Bottom Line
One balance sheet with a name on it is better than four exchange ledgers, and it is not a waterfall. Crypto has never had the fund, and until it does, the next big default gets paid for by whoever was right. The other half of the argument is what a hedged crypto book costs to carry when every venue wants its own collateral first, and that is the next issue. ISO puts one name in the middle, and the venues are still stopping at the winner.
Disclosure, not a recommendation: I am Chief Strategy Officer at ISO Markets and I founded Liquid Mercury, which builds the technology behind ISO Markets. I have an economic interest in both. Nothing in this issue is investment advice.
All the best,
— Tony
If this landed, forward it to one person who'd find it useful. Growth comes from readers like you passing it along. And if someone forwarded this one to you, subscribe here to get The Saliba Signal in your inbox every week.