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Borrowers on Nexio are classified into three tiers based on regulatory oversight, operational track record, collateral discipline, and counterparty transparency. The tier determines borrowing limits, reporting cadence, and eligible strategies. This framework ensures credit size and strategy access match each borrower’s proven reliability and risk controls. When classification is unclear, Nexio’s Risk and Governance Committee determines placement by reviewing audited financials, venue access, and compliance records. For example, a Tier 1 borrower with verified credit quality and audited off-chain assets may borrow up to $10 million in BTC under a legally binding agreement, without posting full collateral. Tier 2 and 3 borrowers, by contrast, must post higher on-chain collateral relative to their draw size, reflecting their higher risk and reduced credit transparency. Borrower classification and ongoing monitoring are administered by Nexio’s Risk and Governance Committee, which can adjust tier placement if collateral, compliance, or reporting standards change. The three tiers are as follows:
  1. Tier 1: Comprises regulated trading firms, broker-dealers, or funds operating under recognized jurisdictional oversight (e.g., CFTC-regulated CME participants).
  2. Tier 2: Consists of established market-making or quantitative trading desks with verifiable performance history and robust internal controls, though without direct CME clearing access.
  3. Tier 3: Includes smaller proprietary desks or regionally licensed entities that may lack multi-year audits or operate on less-regulated venues.

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Tier 1 Borrowers

Includes registered trading firms, broker-dealers, or funds under recognized jurisdictional oversight (e.g., CFTC-regulated CME participants). They maintain external audits, formal risk committees, and bank-level compliance programs. Tier 1s qualify for the lowest-risk Series, such as CME Basis and Delta-Neutral Funding, with the most favorable collateral ratios and rapid approvals.

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Tier 2 Borrowers

These are active market-makers or quantitative funds operating across major exchanges with verifiable P&L history and strong internal controls, but no direct CME clearing status. They typically access moderate-risk Series, such as cross-exchange market-making or arbitrage, and operate under higher collateral requirements than Tier 1s.

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Tier 3 Borrowers

Smaller funds, prop desks, or regionally licensed entities that may lack multi-year audits or trade in less-regulated venues. They face the strictest governance: higher collateral ratios, shorter reporting intervals, and limited draw sizes. Tier 3s can access higher-yield Series (e.g., active market-making or directional credit) once compliance and monitoring conditions are met.