Best Execution
This page explains how the Locked Yield engine executes deposits and borrows to pursue the best risk-adjusted outcome across supported venues, while maintaining strong controls around liquidity, collateralization, and protocol risk.
How Locked Yield executes
Locked Yield is designed to efficiently match supply and demand first, and only route to external venues when internal crossing is not available.
For depositors (supply / earn)
When you deposit collateral into Locked Yield, the engine follows this sequence:
Receive collateral Your deposit is accepted as eligible collateral (real assets only).
Attempt internal crossing (supplier ↔ borrower) The engine checks whether the deposit can be crossed with an existing borrower demand at attractive terms. If crossing is possible, execution happens internally.
If no cross: route to lending venues (best choice) If internal matching is not available, the engine supplies assets to the lending venue(s) offering the best conditions.
Swap variable rate exposure into IRS fixed rate (partial allocation) A portion of the supplied position is used to enter interest-rate swaps (IRS) to convert variable borrowing/lending dynamics into fixed-rate exposure where it improves execution.
Allocate the remainder to XLP-S Remaining tokens (per the strategy allocation) are routed to the XLP-S tranche to earn additional yield, subject to caps and risk controls.
For borrowers (borrow / pay)
Borrow execution is the mirror image:
Post collateral
Attempt internal crossing (borrower ↔ supplier) to source liquidity efficiently
If no cross: borrow from lending venues (best choice)
Use IRS where beneficial to lock rates and manage rate risk
Use XLP-S allocation where applicable per strategy constraints and risk limits
Venue choices
Locked Yield routes flow only to venues that meet criteria across pricing, liquidity, asset support, and security posture.
Major lending venues
Primary execution targets are high-liquidity, battle-tested protocols with strong security track records and deep markets (e.g. Aave, Fluid, and other supported venues as listed in the platform).
Smaller venues with caps
To improve execution and expand opportunity sets, the engine may allocate smaller amounts to additional protocols, but always within strict per-venue caps and internal risk limits (including protocol exposure limits, asset-specific limits, and liquidity constraints).
How the venue is chosen
Best Execution continuously evaluates venues using live and expected conditions. Routing is determined by a scoring function that prioritizes the best risk-adjusted execution for each user action.
Key inputs include:
Best yield given current and predicted utilization rates We don’t just look at the current APY. We account for how utilization is likely to move after execution and how rates may react.
Best LTV / collateral efficiency The engine prefers venues that allow stronger borrowing power and safer collateral parameters, depending on the user’s objective.
Best IRS fixed rate When using rate swaps, the engine selects the best fixed-rate execution available for the relevant asset and tenor, within risk constraints.
User preference: LTV vs yield
Users can choose what matters more:
Maximize yield, or
Maximize LTV / collateral efficiency
The Locked Yield engine will then find the best option(s) that match the chosen preference, while staying inside risk limits.
HF balancing & collapse-risk mitigation
Best Execution is not only about pricing—it also manages systemic exposure.
The algorithm tracks:
Supplied vs borrowed equilibrium per venue and per asset
Health metrics that can signal concentration or liquidity stress
When imbalances build, the engine can rebalance positions across venues and strategies to reduce the probability of a venue-specific liquidity spiral and to mitigate broader platform collapse risk. Rebalancing is always constrained by:
caps,
liquidity/withdrawal constraints,
slippage limits,
and safety checks.
XCCY Telegram bot alerts & suggested actions
To help users stay safe during market moves, the platform provides a Telegram bot that can:
notify you when your collateral needs a top-up (risk approaching thresholds),
provide actionable prompts for maintaining safe collateralization,
and, when relevant, propose hedging and/or rebalancing actions aligned with the current portfolio state and platform conditions.
(Users remain in control—alerts are guidance, not forced actions.)
Collateral mechanics: real assets for users, lending tokens for the engine
Users can only provide real assets as collateral. You do not need to manage lending tokens, receipt tokens, or strategy routing.
Internally, the protocol may:
mint and manage lending receipt tokens (e.g., venue-specific supplied-asset tokens),
use portions of these positions for IRS rate management, and/or
allocate as designed into XLP Senior Tranche Vault
This structure allows Locked Yield to:
pursue better execution and diversification,
manage operational complexity centrally,
and enforce protocol-level risk controls (caps, rebalancing rules, monitoring) without requiring users to interact with multiple venues directly.
Last updated