CompliFi conducts algorithmic market making in derivatives by playing the counterparty role in all transactions. Traders buy derivatives and pay fees for the advantage of choosing what/when/how much to trade, and pools take the opposite side of each trade onto their balance sheets.
Consequently, CompliFi's investment return on passive liquidity consists of two elements: upfront trading fee revenue and net performance of on-balance sheet exposures. As a result, pool APY is expected to fluctuate with the market. However, CompliFi's risk engine is designed to manage these fluctuations, ensuring that pools have both the statistical peformance edge and protection from large negative shocks.
The value of a user's investment position consists of their share of a pool's free collateral (i.e. not currently backing derivatives) and of its derivative portfolio. Both are continuously marked to market, and all liquidity opertions are conducted based on this valuation.