SIP-4: Block Trade TP/SL

Summary

This proposal introduces Block Trade Option Mode as a new deferred-execution mode on top of StandX Block Trade, initially exposed only through Position Take Profit (TP) and Position Stop Loss (SL) workflows.

The resulting behavior is option-like, but SIP-4 does not aim to introduce a fully standardized options product in V1. Instead, SIP-4 creates a limited, position-linked right: once a counterparty pays a Reservation Fee, that counterparty obtains an American-style execution right and may call Execute at any time before expiry, subject to normal settlement and risk validation.

This allows Position TP and SL to become more expressive than standard trigger-based orders:

• Block TP lets a position holder monetize a planned exit by selling the right to take the other side at a predefined price.
• Block SL lets a position holder pay a limited fee to acquire discretionary downside protection, instead of relying on an immediate trigger-based stop.

StandX continues to serve as the escrow, coordination, and settlement layer, enforcing Reservation Fee transfer, Guarantee Deposit lock-up, execution flow, and default compensation.

Motivation

Traditional TP/SL orders on a standard order book are mechanically simple, but they are limited in two important ways:

1. They typically depend on market execution at the time of trigger, which may introduce slippage or unstable fills in volatile conditions.
2. They are trigger-driven and inflexible. Once triggered, the order is pushed into execution logic immediately, even if the move is brief, abnormal, or inconsistent with the user’s actual decision intent.

SIP-4 reframes TP/SL as a Block Trade-based right rather than a pure trigger instruction.

Block TP: “Earn more on TP”

A user with an existing position plans to exit around a target profit level. Another user believes price may continue moving favorably and wants to secure the right to enter through Block Trade at a predefined price.

• Traditional mode: the position holder exits when the TP is reached, and that exit only creates ordinary market impact or liquidity consumption.
• Block TP mode: the position holder offers that future exit opportunity as a tradable right through Block Trade. A counterparty pays a Reservation Fee to secure the right to take the other side at the predefined price at any time before expiry.

This creates two distinct sources of value:

1. Position holder as seller. Once the block is taken, the seller receives additional income from the Reservation Fee. If the right is exercised, the seller exits through the prearranged block and keeps the fee. If the right expires unused, the seller keeps the position and still retains the fee.
   Core value: while waiting for a planned TP exit, the position holder monetizes the exit opportunity itself and earns incremental cash flow from that optionality.

2. Counterparty as buyer. By paying a relatively small fee, the buyer secures an American-style right to enter at a predefined price before expiry, without depending on immediate order-book execution at the moment of entry.

Block SL: “Lose less on SL”

A user wants downside protection for an existing position, but also wants discretion during volatile or abnormal price action.

• Traditional mode: a stop-loss behaves like a mechanical trigger. Once the stop price is hit, the order is created and sent to market immediately, even if the move is only a short-lived wick.
• Block SL mode: the position holder buys a block right from a counterparty by paying a Reservation Fee. This grants the right to exit at a predefined price at any time before expiry, rather than forcing immediate execution through a trigger-based market order.

This changes the behavior materially:

1. Position holder as buyer. The holder gains discretionary protection instead of automatic liquidation-by-trigger. The holder may wait, observe market conditions, and decide whether to execute the right before expiry. If price stabilizes or rebounds, the holder may leave the block unused. If conditions continue to worsen, the holder may execute and exit through the prearranged block.
   Core value: the user pays a limited fee to turn a forced stop into an on-demand protection right.

2. Decision flexibility as protection. The fee does not merely buy a stop price; it buys timing discretion under stress. This reduces the risk of being forced out by transient moves while still preserving a defined exit path if conditions worsen.

Scope

V1 Product Scope

SIP-4 is intentionally narrow in its initial release.

The user-facing entry points for this mode are limited to:

• Position TP
• Position SL

In other words, V1 does not expose a general-purpose options interface. Users do not browse a full options market, construct arbitrary strategies, or create naked option structures. Instead, SIP-4 introduces an option-like mechanism only in the context of managing an already existing position.

Forward Compatibility

Although the initial UI surface is constrained to Position TP/SL, the underlying lifecycle is intentionally more general:

• one party posts a conditional exit or entry opportunity through Block Trade,
• another party pays a Reservation Fee to reserve that opportunity,
• a Guarantee Deposit is locked to support execution integrity,
• the buyer of the right may Execute at any time before expiry.

This preserves a clean path for future SIPs to expose a broader Block Option market without redesigning the core state machine.

Terminology

To keep the protocol description concise, this proposal uses the following naming:

• Block Trade Option Mode: the new Block Trade mode introduced by SIP-4.
• Block Option: a short name used throughout this proposal for an order running under Block Trade Option Mode.
• Reservation Fee: the fee paid by the buyer of the right to reserve execution access before expiry.
• Guarantee Deposit: the deposit locked by the obligated side to support execution integrity and default compensation.
• Expiry: the timestamp after which the reserved right is no longer exercisable.
• Execute: the action that initiates actual settlement of a taken slice.

High-Level Mechanism

SIP-4 separates reservation from settlement.

In standard SIP-1 Block Trade, matching moves quickly into settlement. In SIP-4, those two steps are intentionally split:

1. A block is created for a predefined price and quantity.
2. A counterparty takes a slice by paying a Reservation Fee.
3. The corresponding obligated side locks the required Guarantee Deposit.
4. The taken slice remains reserved until one of the following happens:
   • the right holder calls Execute,
   • the slice expires unused,
   • the slice fails due to settlement or obligation failure.
5. If Execute is called before expiry, StandX attempts normal settlement using the prearranged price and quantity.

This creates an American-style exercise flow: once the fee is paid and the slice is reserved, the right holder may start the trade at any time before expiry.

Role Mapping in V1

The economic role of buyer or seller depends on whether the user is setting TP or SL.

Block TP

For a Position TP flow:

• the position holder is economically the seller of the right,
• the counterparty is economically the buyer of the right.

The position holder receives the Reservation Fee once the block is taken. In exchange, the holder commits to honoring the predefined Block Trade exit if the buyer executes before expiry.

Block SL

For a Position SL flow:

• the position holder is economically the buyer of the right,
• the counterparty is economically the seller of the right.

The position holder pays the Reservation Fee in exchange for the ability to exit through the predefined Block Trade before expiry.

This role split is important because the UI is always attached to the existing position holder, but the economic direction of the right changes between TP and SL.

Core Protocol Rules

1. Predefined Price and Quantity

Each Block Option defines:

• a fixed Fill Price,
• a quantity,
• an expiry time,
• a side relationship derived from the existing position and TP/SL intent.

For V1, Fill Price MUST be predetermined at block creation and remains unchanged throughout the lifecycle of the taken slice.

2. Reservation

When a taker reserves a slice:

• the slice is no longer available to others,
• the relevant Reservation Fee is transferred according to the mode rules,
• the required Guarantee Deposit is locked on the obligated side.

From that point onward, the slice enters a reserved-but-not-yet-settled state.

3. Execution Right

Once a taker has paid the Reservation Fee, the right holder may call Execute at any time before expiry.

This right is not dependent on a separate trigger event. TP/SL remains the product framing and user entry point, but the underlying execution right behaves like an American-style right rather than a mechanical trigger order.

4. Settlement

If Execute is called before expiry, StandX attempts settlement using the same Block Trade price and quantity already agreed during reservation.

Settlement remains subject to normal engine validation, including any standard checks required to open or accept the resulting position state.

5. Expiry

If a taken slice reaches expiry without being exercised:

• no settlement occurs,
• the reserved execution right is extinguished,
• the slice resolves as closed,
• fee and deposit balances are released according to the policy rules of the mode.

Fee and Deposit Logic

Reservation Fee

Reservation Fee is the payment required to reserve a slice and obtain the right to execute it before expiry.

Economically:

• in Block TP, the counterparty pays the Reservation Fee to secure future entry access,
• in Block SL, the position holder pays the Reservation Fee to secure future protective exit access.

Guarantee Deposit

Guarantee Deposit is the locked collateral posted by the obligated side to support execution integrity.

Its purpose is not to replace normal trading margin, but to make failure costly and to provide a compensation base if the obligated side cannot honor the arrangement for reasons attributable to that side.

The precise sizing rule may be implementation-specific, but the guiding requirement is that the deposit must be meaningful enough to discourage non-performance and support compensation on default.

State Machine

SIP-4 is designed to remain broadly compatible with SIP-1 state conventions while adding a new reserved state for deferred execution.

Block Status

Order Status

Failure Handling

SIP-4 distinguishes between unused expiry and execution failure.

Unused Expiry

If a reserved slice is never exercised before expiry:

• the slice resolves without settlement,
• the execution right disappears,
• the order transitions to Closed.

This is a normal outcome, not a protocol failure.

Execution Failure

If Execute is called but settlement cannot be completed, the slice transitions to Failed.

Typical causes may include:

• the obligated side cannot satisfy the arrangement for reasons attributable to that side,
• required settlement conditions fail,
• the resulting position cannot pass normal validation.

When failure is attributable to the obligated side, the Guarantee Deposit exists specifically to support penalty and compensation handling.

User Stories

Context

Assume Alice already holds an existing position on StandX and wants to manage it through Position TP or Position SL. Bob is a counterparty interested in reserving or selling a Block Trade-based right under the terms offered by SIP-4.

Scenario 1 — Block TP is taken and later exercised

Alice is long and wants to exit 100 units at a predefined TP price of 120.

Instead of placing a normal TP instruction, Alice posts a Block TP slice at 120 with an expiry in 48 hours. Bob believes momentum may continue upward and pays the Reservation Fee to reserve the right.

From that point onward, Bob may call Execute at any time before expiry.

Bob later chooses to exercise. The order enters Matching, StandX performs settlement at the predefined Block Trade price, and the order resolves as Filled.

Outcome: Alice exits as planned and has also earned the Reservation Fee. Bob secures the prearranged entry without depending on immediate order-book execution.

Scenario 2 — Block TP is taken but expires unused

Alice creates the same Block TP opportunity and Bob reserves it by paying the Reservation Fee.

Before expiry, Bob never calls Execute. The market evolves in a way that makes the reserved entry unattractive, so Bob lets the right lapse.

At expiry, the order resolves as Closed without settlement.

Outcome: Alice keeps the position and also retains the economic benefit associated with the reservation. Bob loses only the bounded fee paid for the reserved right.

Scenario 3 — Block SL is purchased as discretionary protection

Alice is long and wants downside protection, but does not want a purely trigger-based stop that may force her out during a short-lived wick.

She opens a Block SL opportunity at a predefined exit price and pays the Reservation Fee to reserve the right from Bob, who serves as the obligated counterparty and locks the required Guarantee Deposit.

After reservation, Alice may call Execute at any time before expiry.

The market becomes unstable. Alice watches price action and decides to wait rather than immediately exit.

Outcome: unlike a standard stop-loss, the protective right exists independently of a mechanical trigger. Alice has discretion over timing rather than being forced into automatic execution.

Scenario 4 — Block SL is later exercised after conditions worsen

Continuing from the prior scenario, Alice keeps monitoring the market. Conditions continue to deteriorate and she decides that protection should now be used.

Alice calls Execute before expiry. The order enters Matching, and StandX attempts settlement using the predefined Block Trade terms.

Settlement succeeds and the order resolves as Filled.

Outcome: Alice exits through the prearranged path after making a discretionary decision, rather than through an immediate trigger-based market order. The reserved right acted as on-demand protection.

Rationale

SIP-4 is intentionally designed as a narrow first step.

The proposal does not attempt to define a full options protocol, options chain, volatility surface, or generalized structured derivatives market. Instead, it introduces a limited but powerful primitive in a familiar user workflow: position management.

This narrower framing has three advantages:

1. Better user comprehension. Users already understand TP and SL as position management concepts.
2. Immediate utility. The feature improves a workflow users already perform frequently.
3. Forward extensibility. The same Reservation Fee + Guarantee Deposit + Taken + Execute before expiry lifecycle can later support broader Block Option functionality if StandX chooses to open that path.

Backward Compatibility

SIP-4 is designed to remain close to SIP-1 where possible.

In particular:

• block-level state names remain Open, OnchainMatched, and Closed,
• OnchainMatched is generalized to mean fully reserved rather than necessarily fully settled,
• order-level lifecycle remains familiar, with the single addition of Taken to represent reserved-but-not-yet-settled slices.

This minimizes disruption to existing Block Trade indexing, monitoring, and mental models while still enabling deferred execution semantics.

Security and Risk Notes

SIP-4 introduces deferred execution and therefore a longer-lived obligation window than standard SIP-1 settlement.

Key risk considerations include:

• the obligated side may become unable or unwilling to honor the arrangement before expiry,
• deferred execution creates additional monitoring requirements,
• fee transfer and deposit release rules must be unambiguous,
• settlement still depends on the same core engine safety checks used elsewhere in the system.

Guarantee Deposit is therefore a necessary control, not an optional convenience. It provides a concrete economic consequence for non-performance and supports compensation when the obligated side fails for reasons attributable to that side.

Future Extensibility

Although V1 limits user entry to Position TP/SL, the underlying mechanism is deliberately generic.

Future SIPs may extend the same primitive toward:

• more general position-linked block rights,
• non-TP/SL directional entry products,
• richer pricing logic for reservation,
• a broader Block Option market surface.

SIP-4 therefore acts as both a product improvement for TP/SL and a protocol bridge toward more generalized option-like trading on Block Trade.