> ## Documentation Index
> Fetch the complete documentation index at: https://developers.circle.com/llms.txt
> Use this file to discover all available pages before exploring further.

# StableFX risk buffers

> Understand how risk buffers protect counterparties during StableFX trade execution

Risk buffers add a layer of protection to StableFX trades. During trade
execution, StableFX holds a proportional amount of the trade as buffer from both
the taker and maker in escrow.

This buffer manages counterparty risk, meaning one party fails to fund the trade
after agreeing to it. By holding funds in escrow upfront, StableFX ensures both
sides commit to the trade. This reduces exposure and improves settlement
integrity.

## Risk buffer calculation

StableFX defines risk buffer settings per maker and currency pair. Each setting
controls how much of the taker's and maker's notional amounts are reserved as
buffers for that trading pair.

| Parameter             | Description                                                        |
| --------------------- | ------------------------------------------------------------------ |
| Taker risk buffer %   | Percentage of the sell currency amount held as the taker's buffer. |
| Taker risk buffer min | Minimum value of the taker's risk buffer in absolute terms.        |
| Maker risk buffer %   | Percentage of the buy currency amount held as the maker's buffer.  |
| Maker risk buffer min | Minimum value of the maker's risk buffer in absolute terms.        |

A value of 0% is valid for any risk buffer. If no setting exists for a given
maker-taker pair, both risk buffers default to 0.

When a taker requests a quote, StableFX:

1. Retrieves the risk buffer configuration for the maker and currency pair.
2. Calculates both taker and maker risk buffers based on the configuration
   parameters.
3. Returns the taker's risk buffer in the quote response as the `collateral`
   parameter.

This gives the taker full visibility into the total funds required before trade
execution.

## Trade broadcast

After StableFX registers signatures for both the taker and maker, it broadcasts
the [`recordTrade`](/stablefx/references/contract-interfaces) function to the
settlement contract. This function withdraws trade collateral from each trader's
wallet using the Permit2 protocol.

<Warning>
  Both traders must have sufficient balance for their collateral amount specified
  on the quote and
  [Permit2 approval](/stablefx/howtos/grant-usdc-allowance-permit2) for their
  funding token to successfully record the trade onchain.
</Warning>

## Where to find the risk buffer

The risk buffer amount appears in several places:

* **Create Quote API response**: Returned as the `collateral` field for the
  taker. See [Create a quote](/api-reference/stablefx/all/create-quote).
* **Get Trade API response**: Makers can find the `collateral` field in the
  trade response. See
  [Get a trade](/api-reference/stablefx/all/get-trade-by-id).
* **Typed data for signing**: Available in the `message.permitted.amount` field
  of the EIP-712 typed data.

The currency of the collateral is always the currency that the trader is
responsible for funding.

## How risk buffers affect settlement

### Breach scenarios

If a trade reaches maturity but remains unsettled, StableFX calls the escrow
contract's breach function to expire the trade. The outcome depends on which
party has funded:

**Neither party funds**

If neither the taker nor the maker funds before expiry, the smart contract
returns both parties' risk buffers from escrow. No breach compensation is
applied.

**One party funds**

If only one party funds the trade before expiry, the non-funding party is
treated as the breaching party. The contract:

* Awards the non-funding party's risk buffer to the funding party as
  compensation.
* Returns the funding party's own buffer and trade funds to them.

This keeps the process fair regardless of which side funds first. The party who
funds is protected, while the party who doesn't bears the cost of their
collateral.

### Funding

Parties are only required to fund the difference between their collateral and
the trade amount. This calculation is built into the StableFX Fund APIs.