Define ‘Atomic Settlement’ and Its Relation to Counterparty Risk Reduction

Atomic settlement means that a transaction is executed entirely and instantaneously, or it fails completely, ensuring no partial states. In derivatives, this guarantees that the asset exchange and collateral release happen simultaneously.

This instant finality eliminates the time window where a counterparty could default after one side of the trade is completed. It is key to achieving trustless, non-custodial exchange.