This series has described how Arkis defines a risk boundary and enforces it on-chain, where a smart contract validates every instruction before it executes. Centralized exchanges and other off-chain venues work differently. They run their own execution environments, so the protection layers Arkis deploys on-chain cannot reach inside them. That gap matters, because the deepest liquidity and a large share of institutional volume still sit on those venues. We built the infrastructure described here so borrowers can trade on centralized exchanges while Arkis keeps the risk boundary intact.

Spark's announcement of the Spark Prime pilot with M1 Capital gives a concrete book to explain CEX infrastructure. Spark Prime is powered by the Arkis margin engine, so the mechanics described below are running underneath this pilot. Spark deployed $15M of USDC alongside roughly $5M of M1's own collateral, giving M1 about $20M across multiple accounts under a single portfolio margin. M1 runs parallel delta-neutral carry trades with it, across both centralized and decentralized venues, pairing spot longs with short perpetual futures at matched notional. Because each position is hedged across instruments and venues, the risk boundary has to hold everywhere at once rather than account by account.

Funding-rate spreads differ venue by venue, so returns improve with reach. But the yield on a fully hedged position is thin, and a single exchange failure costs more than the strategy earns in years. M1 needs venue breadth and counterparty safety at the same time.

Centralized venues introduce risks that on-chain enforcement does not: keeping a position risk-bounded inside an execution environment Arkis does not run, protecting the assets if a venue fails, and being able to liquidate when a single venue's liquidity is too thin.

Governing the position across centralized exchanges

Arkis holds a master account at each integrated exchange; borrowers trade through dedicated sub-accounts underneath it. The master account's configuration and ongoing state sit under Arkis's direct oversight. Sub-accounts are operationally separate, but they remain subordinate to the master account's oversight.

For M1, this means the centralized-exchange side of the book runs inside the same framework as everything else. The sub-accounts are visible in real time and governed as part of the single portfolio margin that covers the decentralized side as well, so Arkis can act on the full book.

Risk enforcement follows from this structure. Because token restrictions can't be applied at the protocol level, any position in an asset outside the set approved for that borrower is excluded from the margin calculation entirely and subject to immediate liquidation. If exposure drifts outside the limits set for that account, Arkis can reduce or close the position directly, without waiting for the borrower. The margin engine also accounts for the liquidations a venue would perform itself, and closes a position ahead of the venue acting on it. Enforcement works differently from the on-chain side, but it holds the same boundary.

Protecting and moving the assets

The master account structure governs what happens to positions. It doesn't address what happens to the assets if an exchange fails: anything held on an exchange is exposed to that exchange's insolvency.

Arkis has partnered with Copper for this. ClearLoop, Copper's collateral mobility network, provides off-exchange settlement, which means the assets never sit on the exchange. They stay with Copper, which mirrors them to the venue as tradeable balance the borrower can margin against, while ownership never passes to the venue. The exchange's role is reduced to execution: it never takes possession of what the borrower trades against. Exchanges in the network post their own collateral alongside it, and settlement runs on a pre-determined schedule.

One ClearLoop integration also reaches most of the major centralized venues, so coverage can expand without a separate custodial relationship at each exchange. The collateral behind all of them sits in one pool rather than a funded balance at each venue, and an allocation to a venue can be traded against immediately. Collateral also moves between those venues without friction, which is what allows a position to be liquidated where the liquidity actually is rather than where the capital happens to sit. Settlement runs off-chain, so moving it costs no network wait and no gas.

Together, master accounts and Copper's off-exchange settlement extend the same risk boundary to venues Arkis does not control. A borrower can trade across centralized venues under the same portfolio margin that covers their on-chain book, while the capital stays off those venues and Arkis keeps the ability to act on the position.

One risk these mechanisms do not address is Arkis itself. The people who operate the master accounts have access to them, which makes insider action a risk to customers in its own right. The next piece in the series covers how Arkis constrains it, with fine-grained audited access to every centralized platform we cover.