Leveraged Loan Trading

THE PROBLEM

CLO managers must retain 5% of fair value under new rules, but leveraged loans take 21+ days to settle, tying up capital and creating operational inefficiencies.

TRADITIONAL SETTLEMENT 1 Trade entry into broker-dealer system and ESP upload 2 Allocation by buyer/seller to select sub-funds 3 Buyer/seller trade confirmation and signing 4 Buyer/seller assignment agreement (A&A) execution 5 Buyer/seller settlement date coordination (SDC) 6 Agent SDC and A&A review and approval 7 Trade settles with cash/debt exchange and registry update

THE SOLUTION

ONCHAIN SETTLEMENT 1 Trade entry at T+0 via blockchain ESP 2 Allocation within 1 day with automated processing 3 Agent submits borrower consent and A&A at T+3 4 Buyer/seller SDC coordination at T+7 5 Agent A&A/SDC approval at T+7 6 Trade settles at T+7

OCTAGON XAI CLO INCOME FUND

THE PROBLEM

CLO managers must retain 5% of fair value under new rules, but leveraged loans take 21+ days to settle, tying up capital and creating operational inefficiencies.

OCTIX must offer quarterly redemptions (5-25% of assets) but invests in leveraged loans with 21-day settlement periods. This creates dangerous timing gaps or liquidity mismatches. Example:

1 Shareholders submit redemption requests quarterly 2 Fund has 7 days after pricing date to pay cash 3 But underlying leveraged loans take 21+ days to settle 4 Fund faces 14+ day gap between payment obligation and asset liquidity

FORCED SOLUTIONS

Hold excess cash (reduces returns) Borrow money to fund redemptions (leverage expense) Sell assets at fire-sale prices during stress Gate redemptions (regulatory risk)

WHY 21-DAY SETTLEMENT KILLS INTERVAL FUNDS

Quarterly redemptions require predictable liquidity 21-day loan settlement creates unpredictable cash flows Fund cannot match liabilities (7-day payment) with assets (21-day settlement) Results in either cash drag or leverage costs

THE SOLUTION

Payment stablecoin.

INSTANT REDEMPTION FLOW 1 Investor requests OCTIX redemption 2 Investor locks OCTIX shares in escrow contract 3 XFT instantly mints USDXT to investor (1:1 NAV) 4 Investor receives USDXT immediately 5 Contract holds OCTIX shares in escrow pending settlement 6 OCTIX fund sells underlying loans over 21 days 7 OCTIX sends USD payment to XFT 8 XFT releases escrowed OCTIX shares back to fund 9 OCTIX burns returned shares