What Is ‘Finality’ and Why Is It Essential for Derivatives Settlement?
Finality is the guarantee that once a transaction is recorded on the blockchain, it cannot be reversed, altered, or canceled. For derivatives settlement, this certainty is paramount.
Without finality, a contract's trigger event or collateral transfer could be undone, leading to catastrophic failure of the financial agreement. High finality ensures trust and allows for reliable, automated settlement via smart contracts.
Glossar
Automated Settlement
Settlement ⎊ Automated settlement, within cryptocurrency, options, and derivatives markets, represents the culmination of a trade lifecycle, transitioning from order execution to final ledger updates.
Collateralization Ratio
Margin ⎊ The collateralization ratio, within cryptocurrency and derivatives, represents the proportion of collateral deposited relative to the value of the underlying asset or open position; it functions as a critical risk management parameter, directly influencing systemic stability and counterparty exposure.
Finality
Assurance ⎊ Finality represents the definitive assurance that a confirmed transaction on a distributed ledger is irreversible and cannot be cryptographically or economically challenged.