Settlement

Aroon allows for the creation of cash-settled derivatives markets, including both futures and perpetual futures. These markets are margined and settled in a single asset, rather than in the actual physical underlying asset.

Settlement in Aroon refers to the process of reallocating collateral between accounts under several conditions:

• When a position is closed, either fully or partially, with settlement corresponding to the closed volume.

• Upon changes in the market’s mark price, triggering mark-to-market settlements.

• In perpetual markets, according to the periodic settlement schedule defined by the market.

• When futures markets reach expiration, leading to the closure and settlement of all open positions.

• Following the enactment of a governance proposal to terminate a market.

Aroon functions as a decentralized intermediary for settlement processes between trading participants.

Governance-Defined Parameters

Market proposals in Aroon outline essential market details, including the settlement asset and termination and settlement criteria.

• Settlement Asset: Settlement occurs in the asset defined in the market’s creation proposal. This asset may differ from the market's quote unit.

• Data for Settlement Triggers: Market proposals also specify data sources for settlement triggers, which provide essential information like the market's expiry date/time or periodic settlement schedule.

Settlement at Market Expiry

When a futures market in Aroon reaches its maturity, final settlement is based on data from predefined sources. This settlement uses the final market price provided by the data source, effectively acting as the last mark-to-market settlement.

Upon market settlement:

• All open positions are closed based on the final price.

• Open orders are cancelled.

• Collateral in the market is returned to participants.

• Historical data remains accessible through data nodes, even after the market ceases trading.

Example of Market Expiry

Consider a cash-settled futures market approaching expiration. If the oracle price feed indicates a price different from the last mark price, settlements are adjusted accordingly. For instance, a trader with a long position might receive or pay the difference based on the final settlement price.

Mark-to-Market Settlements

With every change in a market’s mark price on Aroon, the protocol recalculates settlement cash flows for each party holding an open position. This continuous mark-to-market process ensures interim partial payments are accurately computed and allocated to each trader’s margin account, reflecting real-time market dynamics.