{"paper":{"title":"TradeMech: A Method to Multilaterally Net Trades Without Altering Counterparty Exposure","license":"http://creativecommons.org/licenses/by/4.0/","headline":"TradeMech nets trades multilaterally by turning bilateral contracts into chains and cycles while keeping original profits and counterparty exposures unchanged.","cross_cats":["econ.TH"],"primary_cat":"q-fin.TR","authors_text":"Daniel Aronoff, Madars Virza, Robert M. Townsend","submitted_at":"2026-05-03T17:29:36Z","abstract_excerpt":"Financial markets such as bond, derivatives, and repo markets form networks of interdependent obligations. Existing multilateral netting methods typically trade off the extent of netting against preservation of counterparty exposure: central clearing reallocates exposure to a central counterparty, while trade compression may alter bilateral counterparty relationships. TradeMech is a mechanism for markets in which one or two homogeneous fungible objects are traded. The mechanism transforms a network of initial bilateral contracts into chains and cycles, nets the designated object multilaterally"},"claims":{"count":4,"items":[{"kind":"strongest_claim","text":"The construction achieves maximal multilateral netting of the designated object while preserving each agent's contractual profit and preserving the location of counterparty risk.","source":"verdict.strongest_claim","status":"machine_extracted","claim_id":"C1","attestation":"unclaimed"},{"kind":"weakest_assumption","text":"The initial network of bilateral contracts for one or two homogeneous fungible objects can always be transformed into chains and cycles such that the assigned multiparty trades preserve original exposures and profits.","source":"verdict.weakest_assumption","status":"machine_extracted","claim_id":"C2","attestation":"unclaimed"},{"kind":"one_line_summary","text":"TradeMech converts bilateral trade networks into chains and cycles for maximal multilateral netting while preserving each party's profits and original counterparty risk locations.","source":"verdict.one_line_summary","status":"machine_extracted","claim_id":"C3","attestation":"unclaimed"},{"kind":"headline","text":"TradeMech nets trades multilaterally by turning bilateral contracts into chains and cycles while keeping original profits and counterparty exposures unchanged.","source":"verdict.pith_extraction.headline","status":"machine_extracted","claim_id":"C4","attestation":"unclaimed"}],"snapshot_sha256":"2f2f3e9e54a090d5e12f260b1997936f1b1d14fd9a7e35925323770a092e9b1b"},"source":{"id":"2605.15210","kind":"arxiv","version":1},"verdict":{"id":"18483433-7428-4f92-bd6b-c66ce9c46c86","model_set":{"reader":"grok-4.3"},"created_at":"2026-05-19T17:20:32.218254Z","strongest_claim":"The construction achieves maximal multilateral netting of the designated object while preserving each agent's contractual profit and preserving the location of counterparty risk.","one_line_summary":"TradeMech converts bilateral trade networks into chains and cycles for maximal multilateral netting while preserving each party's profits and original counterparty risk locations.","pipeline_version":"pith-pipeline@v0.9.0","weakest_assumption":"The initial network of bilateral contracts for one or two homogeneous fungible objects can always be transformed into chains and cycles such that the assigned multiparty trades preserve original exposures and profits.","pith_extraction_headline":"TradeMech nets trades multilaterally by turning bilateral contracts into chains and cycles while keeping original profits and counterparty exposures unchanged."},"integrity":{"clean":true,"summary":{"advisory":0,"critical":0,"by_detector":{},"informational":0},"endpoint":"/pith/2605.15210/integrity.json","findings":[],"available":true,"detectors_run":[{"name":"doi_compliance","ran_at":"2026-05-19T17:26:34.891549Z","status":"completed","version":"1.0.0","findings_count":0}],"snapshot_sha256":"2fe385cad36ce907021f6ea731db650af1602ceec39d494afb71ab6f3be25e3b"},"references":{"count":13,"sample":[{"doi":"","year":2026,"title":"Netwrap:a deficiency-resilient protocol for multilateral netting with preserved bilateral exposures","work_id":"2a316c29-e5df-4893-8f5c-c6a2da98e4a8","ref_index":1,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2023,"title":"Otc derivatives statistics at end-june 2023","work_id":"3e9d5bc4-ff2e-4df7-909d-6863a68ce29f","ref_index":2,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2025,"title":"F. Boissay, C. Borio, T. Fleischman, R. Townsend, and E Zakrajsek. Multilateral trade credit setoff. Working paper BIS, 2025","work_id":"12bf1218-70a3-4694-a9c5-fb757de99505","ref_index":3,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2001,"title":"Thomas H. Cormen, Charles E. Leiserson, Ronald L. Rivest, and Clifford Stein. Introduction to Algorithms. The MIT Press, 77 Massachusetts Avenue, Cambridge, MA 02139, 2nd edition, 2001. 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