Netting inside the settlement window

Obligations do not settle one by one. They accumulate inside a settlement window and collapse against each other before anything reaches the chain.

Worked example

A participant trades the same asset three times inside one window:

Gross flow across those obligations is 400 + 250 + 350 = 1000.

The sell offsets part of the buys, so the position that has to be delivered is 400 - 250 + 350 = 500, and once the same collapse is applied on the funding side of the book the amount that actually moves at the close of the window comes to 250.

Same turnover. A quarter of the capital actually moved.

Why this is not just a saving on gas

Every unit of gross flow that reaches the chain is a unit of capital that has to exist, at that moment, in the right place. Netting reduces the capital the market must hold to support a given turnover. Gas is a rounding error next to that.

Rules

• Netting is per asset and per settlement window.
• Obligations from different venues net against each other, because after novation they are the same instrument.
• Bought and sold inside the same window nets to zero. Nothing goes on chain.
• The window length is a protocol parameter. Shorter windows settle more often and net less; longer windows net more and hold exposure longer.