Feedback on ETD Risk Controls Paper

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Imported from previous forum

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I read with interest the recent publication, which now covers risk controls for exchange traded derivatives:

http://fixprotocol.org/documents/6715/FPL%20Risk%20Controls_June2012.pdf

If I am correct this documents focuses on the pre-trade checks that should be in place and then implemented a new ‘pause’ message for when a limit is breached?

“For any new orders (35=D) where the client order has breached a broker’s pre-determined
limits and has been paused within the broker’s internal systems, the FPL Americas Risk
Management Working Group proposes the generation of a pending new message (35=8,
39=A) with the addition of OrdRejReason on the message (103=21, Algorithm risk threshold
breached) to denote that the order has been paused as opposed to accepted or rejected.
It is recommended that the broker incorporate additional information in the Text (58) field on
the pending new message including the algorithmic risk check that failed and the
parameters, eg. “Aggregate Limit Breach”, “exceeds x% ADV”, or other details indicating the
reason why the order has been paused. The format of the data delivered in the Text (58)
field will be structured so as to incorporate the necessary information across a pre-defined
character space”

Whilst this is an excellent summary I think that it misses the two key challenges that the industry faces with regards to eTrading risk controls in the ETD space which are:

  1. Calculating a true real-time margin value for a client across all exchanges and flows for both full-service and give-in business. The key challenges here (aside from running a real-time margin calculator) being access to real-time feeds, normalisation, static data (symbology, client i.e. managed accounts and currency multipliers etc)and then aggregation.

  2. Interfacing with 3rd party risk platforms / exchanges to change limits or halt trading as a result of a limit breach through a common industry standard protocol.

I think where FPL could help is with 2 above so I would be interested in if there have been any thoughts in this space?