Eurex Clearing introduces new Pre-Trade Risk Limit Functionality
29 November 2010 Frankfurt
Image: Shutterstock
Eurex Clearing has launched its “Advanced Risk Protection” solution. The new service enables clearing members and non-clearing members to control their trading and operational risks by setting pre-trade limits on aggregate risk metrics such as the total margin requirement.
All members can define the level of protection for themselves, and clearing members are able to set limits for their non-clearing members. Up to three staggered limits are activated when the pre-defined risk metrics are breached.
The risk checks are performed in real-time based on actual positions using real-time market prices. “A reactive risk management approach is not sufficient to cope with the increasing speed in the trading environment. That’s why we give our customers the tools they need to proactively set risk limits in advance”, explained Thomas Book, member of the Eurex Executive Board responsible for clearing.
“Our Advanced Risk Protection solution contributes to market safety and is our response to the market’s desire for powerful risk controls that are both latency-neutral and can easily be expressed in terms of real risk figures,” said Book.
The Advanced Risk Protection solution has been developed in close cooperation with market participants to ensure that the new limits are simple and effective to use. Members can configure different risk metrics such as total exposure, profit and loss, cash flow or market risk. These metrics are actual aggregated risk measures covering both futures and options positions and provide great flexibility to adequately reflect individual risk management practices and trading patterns.
In addition, a member can specify which of three actions will be activated when a breach of each level or risk limits occurs. At the first level, an alert message is sent to the respective clearing member. In the second stage, the system automatically throttles orders and quotes. In the third level, the stop button functionality is automatically triggered, thus halting all trading activities.
With the Advanced Risk Protection, Eurex Clearing highlights its commitment to market safety and integrity. Today’s launch is another milestone on the road towards safeguarding financial markets. On March 15, 2010, Eurex Clearing launched the Enhanced Risk Solution, the first real-time risk data distribution service for derivatives to be offered by a central clearing house.
With its suite of risk services, Eurex Clearing responds to industry trends like high frequency trading and direct market access, which dramatically increase the number of transactions and speed of trading. Eurex Clearing is the first central counterparty worldwide to offer risk management and margining data in real-time to its trading and clearing members.
All members can define the level of protection for themselves, and clearing members are able to set limits for their non-clearing members. Up to three staggered limits are activated when the pre-defined risk metrics are breached.
The risk checks are performed in real-time based on actual positions using real-time market prices. “A reactive risk management approach is not sufficient to cope with the increasing speed in the trading environment. That’s why we give our customers the tools they need to proactively set risk limits in advance”, explained Thomas Book, member of the Eurex Executive Board responsible for clearing.
“Our Advanced Risk Protection solution contributes to market safety and is our response to the market’s desire for powerful risk controls that are both latency-neutral and can easily be expressed in terms of real risk figures,” said Book.
The Advanced Risk Protection solution has been developed in close cooperation with market participants to ensure that the new limits are simple and effective to use. Members can configure different risk metrics such as total exposure, profit and loss, cash flow or market risk. These metrics are actual aggregated risk measures covering both futures and options positions and provide great flexibility to adequately reflect individual risk management practices and trading patterns.
In addition, a member can specify which of three actions will be activated when a breach of each level or risk limits occurs. At the first level, an alert message is sent to the respective clearing member. In the second stage, the system automatically throttles orders and quotes. In the third level, the stop button functionality is automatically triggered, thus halting all trading activities.
With the Advanced Risk Protection, Eurex Clearing highlights its commitment to market safety and integrity. Today’s launch is another milestone on the road towards safeguarding financial markets. On March 15, 2010, Eurex Clearing launched the Enhanced Risk Solution, the first real-time risk data distribution service for derivatives to be offered by a central clearing house.
With its suite of risk services, Eurex Clearing responds to industry trends like high frequency trading and direct market access, which dramatically increase the number of transactions and speed of trading. Eurex Clearing is the first central counterparty worldwide to offer risk management and margining data in real-time to its trading and clearing members.
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