Smart External Rebalancing Triggers
1. Purpose & Scope
This section specifies the Smart External Rebalancing Trigger system for the Ratio FX Engine. It replaces the current binary Phase 2 threshold with a multi-layered smart trigger system that reduces unnecessary external rebalancing by exploiting the cyclical nature of FX flow on Asian corridors.
The current Phase 2 trigger is binary: when a Reserve Pool's balance deviation exceeds a fixed threshold, Phase 2 fires immediately. This approach does not account for the fact that morning flow in one direction is frequently offset by afternoon flow in the reverse direction. The result is unnecessary external rebalancing on volume that would have self-cancelled through natural reverse flow and Phase 1 settlement mechanics.
The smart trigger system introduces tiered thresholds (Soft, Hard, Emergency), cooldown timers that give reverse flow time to arrive, time-of-day awareness that adapts to flow patterns, and rebalance volume optimisation that avoids over-clearing.
In institutional FX, a good risk manager does not immediately hedge every position the moment it breaches a limit. Instead, they consider whether natural offsetting flow is likely within the next few hours, whether the cost of hedging now exceeds the risk of waiting, and how much to hedge (partial vs full).
Ratio's Reserve Pool faces the same decision on every threshold breach. The smart trigger system gives the protocol the same decision-making framework that an experienced FX risk manager would use: wait when it's cheap to wait, act when the risk demands it, and never over-hedge.
1.1 Key Architecture Constraint: Single-Sided Pools
Ratio uses single-sided stablecoin pools (e.g., USDT Pool, IDRX Pool) at both the Active and Reserve tiers. This means that when Phase 1 settlement fires, the Reserve Pool for one stablecoin receives surplus while the Reserve Pool for the other stablecoin sends deficit coverage. Crucially, reverse user flow naturally reverses this process — afternoon IDR-to-USD flow causes Phase 1 to pull USDT back from the Reserve USDT Pool and send IDRX back to the Reserve IDRX Pool.
This bidirectional Phase 1 mechanic means the Reserve Pool position can naturally decrease without any external intervention. The smart trigger system exploits this property by introducing a cooldown period that gives natural reverse flow time to reduce the Reserve Pool position before committing to external rebalancing.
2. Dependencies
| Dependency | Source | Required For |
|---|---|---|
| Phase 1 Settlement | FX Engine, Layer 9 | Reserve Pool balance changes that trigger threshold evaluation |
| Reserve Pool VaR | Reserve Pool VaR | Emergency threshold override; VaR always bypasses cooldown |
| State Engine Output | FX Engine, Layer 6 | RESTRICT/HALT bypasses cooldown and forces immediate Phase 2 |
| Inventory Skew | Inventory Skew | Continues operating on Active Pool during cooldown; unaffected |
| Oracle MID | FX Engine, Layer 5 | Rate reference for rebalance volume calculation |
3. The Problem: Premature External Rebalancing
3.1 Typical Cyclical Flow Pattern (USD-IDR)
| Time (UTC) | Dominant Flow | Reserve USDT Pool Impact | Driver |
|---|---|---|---|
| 00:00 – 06:00 | USD → IDR | Accumulates USDT surplus (+$30K) | Morning remittance; workers sending USD home as IDR |
| 06:00 – 10:00 | USD → IDR (peak) | Surplus grows (+$50K total) | Peak remittance window; payroll-driven flows |
| 10:00 – 14:00 | IDR → USD (reverse) | Surplus drops (+$20K) | E-commerce payouts; merchants converting IDR to USD |
| 14:00 – 18:00 | IDR → USD | Surplus drops further (+$5K) | Continued reverse; supplier payments |
| 18:00 – 00:00 | Mixed / Low | Stable (~$5K) | Tail flow; minimal volume |
3.2 Cost of Premature Triggering
If the binary threshold is $50K and fires at 06:00 UTC:
- Phase 2 clears $50K of USDT surplus externally (pays ~3 bps execution cost = ~$15).
- Afternoon reverse flow arrives, but now the Reserve USDT Pool is at $0, so the reverse flow pushes it to −$45K (deficit).
- Phase 2 fires again to clear the −$45K deficit (pays another ~$13.50).
- Total external execution cost: ~$28.50 on $95K gross volume.
With a smart trigger that waited for the afternoon offset:
- Reserve USDT Pool peaks at $50K, cooldown starts, afternoon flow brings it to $5K.
- Cooldown expires, position is $5K — below threshold. No Phase 2 needed.
- Total external execution cost: $0.
Daily Savings = Avoided_External_Volume × Avg_Execution_Cost_bps
Example: $90K avoided × 3 bps = $27/day = ~$9,850/year (USD-IDR alone)