> For the complete documentation index, see [llms.txt](https://initiativ.gitbook.io/initiativ/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://initiativ.gitbook.io/initiativ/mm_internal/1.-introduction/1.2-foundational-principles-and-concepts.md).

# 1.2 Foundational Principles and Concepts

The Exchange is built on the following operating principles.

#### Central counterparty clearing

The Exchange is the venue on which transactions are executed. Once a trade is registered, a central counterparty (CCP) steps in as buyer to every seller and seller to every buyer, holding the resulting positions and the associated cash and assets, so a participant faces the CCP rather than the other side of the trade.

Both spot and futures clear through the CCP. For futures, this is the standard treatment for cleared derivatives. For spot, a CCP is required because the Exchange, as a trading venue, cannot itself hold participant cash and allowances or guarantee settlement; that function must sit with an authorised central counterparty.

The clearing partner and account structure are described in Section 8; the overall shape is set, the final arrangement is not yet fixed.

#### Guaranteed settlement and collateralisation

A participant can only enter obligations it has the resources to meet.

* Spot trades are fully collateralised, with no leverage: the cash for a purchase or the instruments for a sale must be available before the trade completes.
* Futures are supported by margin, both initial and variation, set by the CCP.
* Margin may be met in cash and, where the CCP permits and it makes sense for the market in question, in other eligible assets, giving participants a more capital-efficient way to collateralise.
* Those assets may include the underlying instrument itself, and the range of eligible collateral is set by the CCP and may broaden over time beyond the underlying of the instrument being traded.

In all cases the Exchange checks resources in real time before accepting a trade, so trades settle without failure and without unsecured exposure between participants. Executed trades are final, so the Exchange applies comprehensive pre-trade controls (Section 5) to prevent erroneous orders.

#### Continuous trading model

The Exchange operates continuous trading on Business Days, with real-time order matching according to strict price-time priority and no preferential access.

Opening hours are market specific; details are set out in the relevant product section (Section 3). Matching is deterministic and automated under normal conditions, with order book visibility subject to the transparency waivers described in Section 7.

#### Members and Participants

The Exchange operates on a two-level organisational structure.

* A **Member** is the legal entity admitted to the Exchange that holds contractual obligations under the Market Rules.
* A **Participant** is an individual user who acts under a Member’s authority to access the trading system and submit orders.

Each Member may have multiple Participants, each with specific permissions and sub-limits configured by the Member’s Administrator. Members bear legal and financial responsibility; Participants operate within permissions and limits delegated by their sponsoring Member.

#### Trading Limit

The Trading Limit is the core real-time control that ensures a Member can only commit resources it holds. It is calculated continuously from the Member’s available resources in the clearing arrangement, adjusted for open orders, margin requirements, fees and taxes.

* For spot, a buy order reserves the required cash and a sell order reserves the required allowances, on a fully funded basis.
* For futures, the Trading Limit reflects the initial and variation margin the position requires rather than its full notional value.

Limits are enforced at both Member level (aggregate) and Participant level (sub-limits) and are visible in real time on the Trading Platform.