M11 Credit presents an exclusive opportunity for Institutional lenders to access a Prime Brokerage (PB) Pool on Pareto — a fully permissioned, non-custodial platform designed as a settlement layer for institutional-grade capital formation in the digital asset space. This PB Pool brings together leading partners, with Pareto providing the infrastructure, a top-tier Prime Broker as a Borrower, and M11 Credit acting as the administrator and servicer. This innovative Credit Vault is currently live on Optimism and is accessible here. The first tranche of 10m USDC was issued on January 6 2025.
Pareto’s Credit Vault curated by M11 Credit is the first route for Crypto-Native Lenders to Finance Prime Brokerage services
Prime Brokerage Financing
M11's PB Vault provides liquidity to a Special Purpose Vehicle (SPV), which, through financial participation with the Prime Broker, provides margin financing to end borrowers (e.g., trading firms). This structure delivers robust risk management and operational efficiencies for institutional lenders.
This PB Vault marks a significant step in the evolution of decentralized finance (DeFi) capital formation and Prime Brokerage Financing. By utilizing Pareto’s Credit Vaults infrastructure and the Prime Brokerage ecosystem, M11 Credit, together with its partners, is setting a new standard for prudently deploying institutional capital in the digital asset space.
M11’s PB Pool incorporates robust risk mitigation measures to safeguard lender interests. A few of the key features include first-loss protection tranche, restricted SPV activities, flexible withdrawal options, and structural enhancements such as equity maintenance and collateralization ratio tests, wind-down triggers for breach scenarios, and a proceeds waterfall. The pool also ensures ongoing due diligence and reporting transparency. In addition, M11 Credit holds a valid, perfected, and first-priority security interest in the SPV pool’s assets and collateral for the benefit of the lenders. To further enhance protection, a UCC title claim has been established, providing additional security in case of default.
Our team conducts comprehensive due diligence on PB risk methodologies, SPV structures, legal agreements, prime brokerage risk methodology and collateralization frameworks, exchange risk frameworks, and custody and asset protection measures. This process also includes a meticulous evaluation of financing terms, such as durations, withdrawal and deposit cycles, and repricing mechanisms. Finally, in collaboration with our partners, we have designed a robust legal framework inspired by traditional finance Collateralized Loan Obligation structures. For more information about our due diligence, monitoring and reporting process and the legal documentation for this Credit solution, please contact us.
Pareto by Idle: An Institutional-Grade Infrastructure
Idle is a platform that empowers the DeFi market with robust yield automation and hedging instruments, facilitating its expansion and establishing the foundation for a sustainable credit financial ecosystem via a more efficient and risk-adjusted capital allocation.
Pareto is the new credit infrastructure product focusing on onboarding traditional finance institutions in lending activities on-chain.
Credit Vaults feature transparent and KYC/AML-compliant processes while ensuring scalable and secure infrastructure for M11's PB pool.
Learn More and Get Involved
Interested in learning more about the role of Prime Brokerage in digital asset financing?
- M11 Credit curator role by Idle Finance: Medium article
- M11 Credit research paper: Credit Lending Mechanisms for Crypto Trading Firms
