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Not every drawdown resolves during the Observation Period. When losses deepen enough to breach a market’s Protected Exit Threshold, Royco Dawn gives Senior depositors a clearly defined exit path — the ability to withdraw the underlying asset while a predefined level of Junior coverage still remains. Protected Exit is the final layer of Senior protection in the Dawn risk architecture, ensuring Seniors always have a governed, transparent way to act when conditions deteriorate beyond a defined point.

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Protected Exit Threshold

Each market sets a Protected Exit Threshold at creation. If a drawdown reaches this level:
  1. The Observation Period is terminated immediately — no waiting for the window to expire.
  2. Losses against Junior capital are finalized at that point.
  3. Senior depositors gain the option to withdraw the underlying asset, with the remaining predefined level of Junior coverage still intact.
Seniors who believe the remaining Junior buffer is adequate may choose to stay in the market. The Protected Exit Threshold grants the option to exit, not a requirement to do so. Seniors who remain after the threshold is breached continue to hold their position, now backed by the reduced Junior buffer.
The Protected Exit Threshold triggers an early termination of the Observation Period. The two mechanisms are linked: a breach of the threshold ends the Observation Period regardless of how much time remains in the window, and finalizes losses immediately.

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Loss Finalization

When Seniors exit following a Protected Exit event, losses are realized against Junior capital. The sequence is:
  • Junior absorbs the realized loss, reducing its balance.
  • Seniors who exit receive the underlying asset based on their share of the Senior tranche after that loss.
  • If the drawdown is severe enough that losses exhaust Junior capital entirely, Senior depositors become directly exposed to further drawdown with no first-loss buffer remaining.
Seniors who choose to stay after the threshold breach remain subject to this risk if conditions continue to deteriorate.

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Protected Exit Bonus

Some markets include an optional feature called the Protected Exit Bonus. When enabled and the Protected Exit Threshold has been exceeded, Senior depositors who choose to voluntarily withdraw receive a small additional bonus — up to the market-defined percentage — on top of their withdrawal.
The Protected Exit Bonus is optional. Not all markets enable it. Check the individual market page to see whether a bonus is configured and what the defined percentage is.
The bonus serves as a minor incentive for Seniors to exit, which reduces the total pool size and helps restore the market to a healthy coverage ratio. The bonus amount is sourced directly from remaining Junior capital. Seniors who choose to stay in the market after the threshold breach forgo the bonus entirely. The bonus is only available to those who voluntarily withdraw.

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Example

A market is configured with:
  • Protected Exit Threshold: 90%
  • Protected Exit Bonus: 2%
The underlying yield source drops 9%, breaching the 90% threshold. The Observation Period terminates immediately and losses are finalized against Junior capital. Senior depositors now have the option to exit. Alice is a Senior depositor with a $100,000 position. She chooses to exit.
ItemAmount
Alice’s Senior deposit$100,000
Protected Exit Bonus (2%)$2,000
Total Alice receives$102,000
The $2,000 bonus is sourced from remaining Junior capital. Seniors who stay in the market receive no bonus and continue holding their position backed by the remaining Junior buffer.

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