OTC infrastructure
How to choose settlement infrastructure for a Colombian OTC desk
A desk can negotiate a good rate and still lose control during settlement. The design must connect trading to treasury, payments and closing evidence. The following framework is for a desk evaluating a stablecoin–COP flow; it does not assume that a banking or other currency mechanism is available for that flow.
The short answer
Choose infrastructure that explains what happens between accepting a quote and confirming both deliveries. Map funds, counterparty exposure, prefunding, states and owners. Require reconciliation and a safe way to resolve unknown status before increasing volume.
1. Map both legs and the exposure between them
Draw who delivers first, where each balance sits and which evidence enables the next step. Distinguish own balances, prefunding and funds pending from a counterparty. Set internal limits by counterparty, operation and time outstanding, with a person authorized to stop further transfers.
The BIS describes the risk of paying one currency without receiving the other and explains mechanisms such as payment versus payment. Use that distinction to question the actual design: two fast payments do not establish conditional settlement of both legs. Do not attribute protection to an OTC solution without evidence.
2. Define states treasury can reconcile
An end-to-end reference should connect the quote, order, asset transfer and peso delivery. Request a state dictionary: accepted, awaiting funds, under review, sent, confirmed, failed and returned are examples; each needs evidence and an owner.
A send notice does not establish credit. For an integration, ask how notifications are authenticated, how authoritative status is queried and what prevents a repeated request from creating another order. After a timeout or unknown response, query and reconcile before sending funds again.
- A unique operation reference plus each provider reference.
- Expected, received, delivered and outstanding amounts without mixing currencies.
- Change history, approval permissions and closing exports.
3. Test liquidity, limits and continuity
Confirm required balances, windows, limits, liquidity replenishment and conditions for withdrawing prefunds. Compare committed capital and operational work alongside fees and spread. Identify bank, network and provider dependencies and how interruptions are communicated.
A pilot should cover a normal operation and safe simulations of a review, delayed credit and repeated notification. Define who decides when exposure remains open, how operations can be stopped and how balances are reconstructed from records. Increase limits only after addressing the findings.
Due-diligence questions for OTC infrastructure
Scroll the table to see all columns.
| Area | Specific question | Expected evidence |
|---|---|---|
| Exposure | Who delivers first and when does exposure end? | Flow map and settlement conditions |
| Liquidity | What balance is needed and how is it recovered? | Prefunding rules and limits |
| States | How do I distinguish sent from credited? | Definitions and delivery evidence |
| Retries | What happens after an unknown response? | Status query and duplicate prevention |
| Continuity | Who acts when one leg remains pending? | Process, owner and reconciliation |
Verification checklist
- Funds movements and dependencies have named owners.
- Limits account for both the amount and duration of open exposure.
- Prefunding, replenishment, returns and exit conditions are documented.
- States and references can reconstruct every operation.
- The pilot checked reconciliation and duplicate prevention after an unknown response.
Risks and limits
- Delivering first can create exposure to the counterparty failing to complete its leg.
- Prefunds and pending payments can reduce liquidity available for other operations.
- Retrying an uncertain delivery can duplicate payment; resolve its status first.
- Automation and technical controls need contractual and operational assessment for the specific flow.
Frequently asked questions
Does fast settlement remove counterparty risk?
Speed does not establish that. Understand who delivers first, what happens if the other party fails and which mechanism conditions delivery. Evaluate the design and terms alongside observed times.
Does an OTC desk need an API?
That depends on volume, team and complexity. A dashboard can work if it provides sufficient permissions, traceability and reconciliation. An API adds authentication, state management and duplicate prevention requirements.
What should I do with an unknown payment status?
Stop resubmission, query the agreed source of status and reconcile using original references. Escalate to the named owner; a new request should not replace investigation of the earlier payment.
How do I compare prefunding models?
Compare required balances, limits, replenishment, withdrawal conditions, exposure and the cost of committed capital. Give both providers the same volume and operating-hours scenario.
Primary sources
- BIS: FX settlement risk, an unsettled issue
Conceptual framework for exposure between legs and payment versus payment. It does not establish availability for your stablecoin–COP flow.
- Tether: protocols and integration
Technical asset reference; confirm infrastructure coverage separately.
How we prepare and review this guide
Zabio publishes this content to help evaluate stablecoin, exchange-house and OTC-desk workflows. Zabio offers services in this field and has a commercial interest in provider selection.
- Sources with a specific scope
- We link primary documentation for the claims it supports. An issuer source identifies an asset or protocol; it does not establish that a provider accepts it. Commercial documentation describes a published offering, rather than independently tested availability.
- Examples and methods separate from real outcomes
- Numerical examples labeled illustrative use educational assumptions. Checklists and calculations are proposed ways to evaluate a workflow; they are not fees, customer results or execution guarantees.
- Comparisons with visible limits
- Provider selections explain their criteria, review date and what was not verified. They do not give Zabio an independent ranking or replace testing a specific workflow and reviewing its terms.
- Dates and corrections
- The review date identifies a substantive content review. Coverage, prices, terms and service status may change and must be confirmed before transacting. An operational guide does not determine an entity’s legal, tax or accounting obligations.
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