Assure Trade Compliance Ultra Fast

Pre-trade risk controls are a fundamental capability in any automated trading solution today with the increasing complexity of electronic order execution, new regulatory requirements, and internal risk management concerns.

The challenge firms face is to protect themselves from the risks of errant trades without introducing unwanted latency in their trading systems. 

The Redline Pre-Trade Risk (PTR) analytics engine performs a comprehensive and configurable series of risk checks, verifications, and control actions that provide reliable results facilitating compliance with U.S. SEC Rule 15c3-5 and European MiFID II mandates. These checks are available across equities and FX markets.

 
ptr_july_19.png
 

With an easy-to-use interface, Redline Pre-Trade Risk solution enables brokers to set a wide range of risk-check parameters at the instrument, user, and trading group tiers for each of their clients to ensure compliance and protection of trades prior to execution. All users are administered through strictly permissioned roles of administrator, traders, or read-only.

Redline’s Pre-Trade Risk solution is optional and deliverable within Redline’s comprehensive trading solutions. Pre-Trade Risk is efficiently integrated with Redline’s Order Execution Gateway for ultra-low latency performance with minimal performance impact. It can accept orders via the Order Execution Gateway API interface or via Redline’s FIX Order Gateway. The Pre-Trade Risk solution performs price-based order and portfolio limit checks using securities pricing data obtained from Redline’s ultra-low latency InRush™ Ticker Plant.


FEATURES

COMPLIANT

EFFICIENT

Mitigate risk with order and position checks

Uncompromised performance, reducing latency impact on outbound orders.

 

TRANSPARENT

MULTI-ASSET CLASS

Intuitive interface to administer/monitor risk checks and trading activity across users

Applicable risk checks across all major asset classes


Pre-Trade Risk solution provides the scalability, flexibility, and accuracy needed to maximize trading profits while minimizing risk exposure

In addition to all risk checks currently supported, Redline’s PTR solution also supports a tiered system of permissions with administrator, client and read-only all being supported.   This allows for absolute limits to be set globally (or on a per client basis) that cannot be exceeded with clients also having the ability to control their own limits, albeit without overriding those set by the administrator.  Furthermore, read-only is provided for those users with applications that require transparency of risk check thresholds and real-time client trading activity without the need to modify.


Pre-Trade Risk Capabilities

Due to specific characteristics of each trading venue, contact Redline to confirm the mapping of these checks to the venues of your choice.

Order Checks Description Asset Classes Control Parameter Control Action
Single Order QuantityThe quantity of securities in a single order is verified to be less than or equal to the maximum allowedEquities, FXMaximum Order QuantityOrder is rejected
Limit Price DifferenceThe price per security of each limit within a specified percentage of the "best" price (e.g. , for U.S. equities, current NBBO)Equities, FX+/- Limit PercentageOrder is rejected
Limit Order Price TierThe incoming limit order price is checked against a configurable percentage plus or minus the reference price using a configurable number of price percentage tiersEquities, FX+/- Limit PercentageOrder is rejected
Trading StateTrading is either:
- enabled (all orders are allowed)
- disabled (no orders are allowed)
- "reducing" (only orders that reduce open position) are allowed
Equities, FXTRADING_STATE parametersOrder is rejected
Maximum Notional Per MinuteVerifies each order against a defined maximum notional order quantity per minute (sliding window) per symbolEquities, FXMaximum Notional Per MinuteOrder is rejected
Max Position QuantityThe quantity of the order is verified to not exceed a set maximumnumber of maximum net/gross quantity/valueEquities, FXMax PositionOrder is rejected
Average Daily Volume LimitThe volume of the order is verified to not exceed a set percentage of the average daily volume of the symbolEquitiesLimit ADV DifferenceOrder is rejected
Average Daily Volume PercentageThe incoming order quantity is checked against the Average Daily Volume Percentage value times the symbol''s Average Daily Volume quantityEquities, FXAverage Daily Volume PercentageOrder is rejected
Parent/Child Order QuantityThe summation of child order quantifies does not exceed the remaining open order quantity of the parent orderEquities, Futures, Option, FXParent Order QuantityOrder is rejected

In addition to the atomic risk checks, Redline’s PTR also supports the concept of hierarchical limits. If set, this configures PTR to run multiple hierarchical levels of checks on each order. If this value is not set, only the most specific check is run for each order.


Contact our team to learn more about Pre-Trade Risk.