Martingale Systems
Bespoke, bilaterally negotiated OTC event contracts for institutional risk transfer, fully collateralized and settled on-chain.
Key Resources
End-to-end brokered trade – event origination, RFQ, documentation, diversified portfolios, and collateralization.
ThesisWhy long-tail risk remains unpriced & exposed in certain sectors, with liquidity as an underwriting business.
User RationaleCounterparties and incentive structure in our n-of-1 contracts.
Reference
A contract is priced from references anyone can reproduce: the probability implied by the name’s listed options, base rates from our pre-registered panel, and the wedge between them – what the market already charges for the jump. A subsidized on-chain synthetic market follows as the live reference.
Contract
A bespoke OTC event contract, bilaterally negotiated to the hedging party’s exact terms – event, direction, notional, and expiry. It is fully collateralized at inception and settles against the pre-committed public resolution fact.
Market Making
Liquidity is priced as risk warehousing across a diversified book of uncorrelated events, not delta-hedging against a surface that doesn’t exist. The market maker can price what it holds because the flow is identified and screened rather than anonymous.
Existing markets that move one-sided risk clear under a common mechanism: an underwriter takes on exposure, holds a diversified book, and is paid a premium for carrying risk through resolution, with a broker between counterparties. Traditional insurance works this way, as do catastrophe bonds and merger arb.
Event markets were built to clear by anonymous crossing instead. Crowd-sourced books aggregated price discovery well, but fail to attract two-sided flow on tail contracts due to fully collateralized books. Open interest (OI) measures committed contracts that have already been matched, but doesn't measure available liquidity for large, institutional-scale orders. This means fixed-date resolution events price well, but absorb little flow.
Martingale bridges the two structures. Our subsidized anchors buy price discovery at a bounded, known cost. Liquidity is underwritten by a compensated warehouse paid out of measured flow, running a diversified book against known counterparties. Both layers settle on-chain against a single event, so underwriters can protect against adverse-selection risk.
Function
Brokerage for bespoke event risk.
Martingale originates institutional hedging exposure and arranges bilaterally negotiated OTC event contracts – cash-settled swaps between two eligible contract participants, written to the hedging party’s terms. A hedger and a professional warehouse face each other directly, and we are a fee-only arranger: never a party to the trade, carrying no market risk and taking no custody of collateral. Contracts are fully collateralized at inception and settle on-chain against a pre-committed public resolution fact, so there is no FCM in the structure and nothing is centrally cleared. Incumbent event-contract distribution runs the other way around, routing institutional flow through brokers into standardized listed products that clear through an FCM and are retail-fungible by construction.
Pricing
A price before there is a market.
Rather than relying on pure RFQ from our designated market-maker(s), Martingale is developing a generalized pricing model for our bilateral contracts on life-sciences tail-risk, composed of the equity’s listed options, historical base rates from pre-registered panels of outcomes, and the wedge between the two – essentially what the option market already prices the jump at. We recognize that any liquidity provider on a bespoke contract will take these pricing inputs into account, but ultimately rely on internal models prior to negotiation. At scale, subsidized on-chain synthetic markets serve as live pricing on bespoke contracts, or a probability that both counterparties can mark against given adequate informed-participation (X).
Liquidity
Liquidity, underwritten.
n-of-1 event contracts structured as insurance swaps carry one-sided demand (on the hedging side), so crowd-sourced, “prediction market” style books fail to serve bilateral liquidity. Martingale’s model compensates designated market makers on our contracts through the spread and premium on identifiable flow, and runs a diversified book across maximally uncorrelated events. Each new contract in the book is then priced by what it contributes to that book at the margin, which is what the curve (right) shows. We never interpose any trade.