Liquidity Provision

Liquidity Provision on XCCY allows users to earn yield by supporting interest rate swap markets. LPs make fixed-rate products possible by taking controlled rate exposure and earning fees in return.

Core Concept

• XCCY runs pools of interest rate swaps across different assets and tenors.

• Liquidity providers supply capital to these pools.

• In return, LPs earn fees and structural spreads from users locking or trading fixed rates.

LPs are not betting on price direction — they are being compensated for absorbing rate risk.

How LPs Earn Yield

LP yield comes from three sources:

1. Trading Fees

   • Each swap pays an annualized LP fee.

   • Fees accrue over time and settle at maturity, claim or when position is closed.

2. Rate Spreads

   • LPs earn the difference between fixed and floating rates when market demand is imbalanced.

   • This is a structural yield, not speculation.

3. Risk Netting

   • Portfolio margin and DV01 netting allow LP capital to support multiple positions efficiently.

   • This increases capital productivity compared to siloed LP models.

LP Fee Tiers

XCCY supports multiple LP fee tiers, allowing liquidity providers to choose their risk–reward profile:

• Lower fee tiers

  • Tighter pricing

  • Higher fill probability

  • Lower per-trade yield

• Higher fee tiers

  • Wider spreads

  • Higher per-trade compensation

  • Lower fill frequency

This allows LPs to actively position liquidity based on market conditions, similar to professional fixed-income market making.

Risk Exposure

• LPs are exposed to interest rate movements and collateral risk depending on the margin mode used.

• Risk is measured in DV01, allowing precise control over exposure.

• LPs may experience PnL volatility if rates move sharply.

We recommend to use portfolio or X-Mode for better capital efficiency.

For users who prefer lower risk, XCCY offers tranche-based LP options via XLP Junior or Alien Tranches.

Liquidity & Capital Efficiency

• Liquidity is tenor-aware, matching how real fixed-income markets work.

• Capital can be reused across correlated pools due to portfolio margining.

• This supports deeper liquidity and tighter pricing than single-tranche LP systems.

Coin vs USDC-Settled Arbitrage

XCCY supports both coin-settled and USD-settled interest rate swaps.

This creates opportunities for cross-market arbitrage, including:

• Rate basis between coin-settled and USDC-settled IRS

• Dislocations between IRS fixed rates and perpetual funding rates

• Short-term inefficiencies during volatility spikes or liquidity shifts

Advanced LPs and traders can exploit these spreads while the protocol’s risk engine ensures margin safety.

Key Takeaways

• LPs power XCCY’s fixed-rate markets.

• Yield comes from fees, spreads, and efficient risk usage.

• Exposure is to rates, not underlying token prices.

• Tranche structures allow LPs to choose their risk level.