Imported from previous forum
[ original email was from John Harris - john.harris@bondmart.com ]
While I strongly commend the efforts of those who came together to produce the Standardized Guidelines for Risk Management, the “pause” concept featured so prominently in said guidelines is - sorry - non-sensical.
I cannot imagine that any submitter of an electronic order, irrespective of destination, would prefer a pause (and its associated, out-of-band handling) to a rejection in the event the order violates agreed-upon risk parameters. The pause even introduces new risks that the document fails to address.
Respectfully, this document needs to go back to the drawing board.
John,
It should be noted that this particular paper is focused on risk management procedures for Algorithmic and conventional DMA Orders for Cash Equities securities. This class of order flow can be considered to be “medium touch” where the client is expecting a relatively high level of service from their electronic sales/trading coverage. Pausing orders that exceed a pre-defined set of risk or order entry constraints is a relatively common practice in the Cash Equities space. Algorithmic orders typically have long trading horizons, so the adverse impact to average price is generally limited during the time it might take to call the client to verify their intentions for the occasional order that exceeds a threshold. The experience of those involved in the Risk Management Committee is that clients have been generally receptive to having their sales/trading coverage pause an order rather than reject it outright since it reduces their workflow as in many cases, the order is ultimately passed on the algo without the client having to take any further actions.
Thank you for your comment.
We have created a new discussion forum entitled ‘Risk Management’ and encourage any additional feedback on the guidelines to be posted on that forum: http://www.fixprotocol.org/discuss/150.
Once again, the link to the standardized guidelines for Risk Management can be found here: http://www.fixprotocol.org/documents/5537/FPLEquityRiskControls_final.pdf.
Regards,
FPL Program Office
While I strongly commend the efforts of those who came together to produce the Standardized Guidelines for Risk Management, the “pause” concept featured so prominently in said guidelines is - sorry - non-sensical.
I cannot imagine that any submitter of an electronic order, irrespective of destination, would prefer a pause (and its associated, out-of-band handling) to a rejection in the event the order violates agreed-upon risk parameters. The pause even introduces new risks that the document fails to address.
Respectfully, this document needs to go back to the drawing board.
[ original email was from John Harris - john.harris@bondmart.com ]
Thank you - please see my reply to yours in the new discussion forum.
John,
It should be noted that this particular paper is focused on risk management procedures for Algorithmic and conventional DMA Orders for Cash Equities securities. This class of order flow can be considered to be “medium touch” where the client is expecting a relatively high level of service from their electronic sales/trading coverage. Pausing orders that exceed a pre-defined set of risk or order entry constraints is a relatively common practice in the Cash Equities space. Algorithmic orders typically have long trading horizons, so the adverse impact to average price is generally limited during the time it might take to call the client to verify their intentions for the occasional order that exceeds a threshold. The experience of those involved in the Risk Management Committee is that clients have been generally receptive to having their sales/trading coverage pause an order rather than reject it outright since it reduces their workflow as in many cases, the order is ultimately passed on the algo without the client having to take any further actions.
Thank you for your comment.
We have created a new discussion forum entitled ‘Risk Management’ and encourage any additional feedback on the guidelines to be posted on that forum: http://www.fixprotocol.org/discuss/150.
Once again, the link to the standardized guidelines for Risk Management can be found here: http://www.fixprotocol.org/documents/5537/FPLEquityRiskControls_final.pdf.
Regards,
FPL Program OfficeWhile I strongly commend the efforts of those who came together to produce the Standardized Guidelines for Risk Management, the “pause” concept featured so prominently in said guidelines is - sorry - non-sensical.
I cannot imagine that any submitter of an electronic order, irrespective of destination, would prefer a pause (and its associated, out-of-band handling) to a rejection in the event the order violates agreed-upon risk parameters. The pause even introduces new risks that the document fails to address.
Respectfully, this document needs to go back to the drawing board.