Pre-Trade Risk Management
Low-latency solution for trading and sponsored access clients
Pre-Trade Risk Management for INET Nordic
In the current marketplace, there is an increased focus on risk management and specifically on pre-trade risk management in relation to new market access models such as Sponsored Access and DMA (Direct Market Access). As high frequency and algo trading replace manual processes, the need for automated control systems to reduce risk increases.
Pre-Trade Risk Management for NDTS and Genium INET
Nasdaq has developed a pre-trade risk management service that provides customers of its Nordic equity derivatives and commodities marketplaces a pre-trade risk management solution that virtually adds no latency.
Complete MIFID II proof pre-trade risk protection with order level control of trading.
Nasdaq Nordic's Pre-trade Risk Management (PRM) is designed to prevent loss and damage caused by human errors, fat fingers and miscalculated algos. PRM validates orders entered via OUCH and FIX and can be used both for your firms own trading or for your sponsored access customers. PRM was developed with highly automated trading flows in focus and adds no latency to order execution. It is compliant with ESMA guidelines.
Pre-trade risk management service
As the leader in trading and data technology for the financial industry, Nasdaq has developed a pre-trade risk management service that provides customers of its Nordic equity, equity derivatives and commodities marketplaces: a pre-trade risk management solution that virtually adds no latency. Nasdaq's cost-efficient way to take control and reduce risk is the pre-trade risk management system (PRM). PRM is a solution that ensures market integrity, is compliant with ESMA guidelines and focuses on highly automated trading flows. The functionality has minimal latency impact with a mix of pre- and post-trade controls that also facilitates sponsored access, GCM/NCM relationships and low-latency DMA.
Fat Finger Price Checks
Fat finger checks catch order entry errors by checking the price against the current last sale. Fat finger price checks compare price instructions on incoming orders against a reference price.
- Fat finger price checks compares price instructions on incoming aggressive and passive orders against the current last sale. If the order deviates more than an order book configured parameter (%), the order will be rejected.
- Fat finger price checks during auctions compare the price of an incoming order against the closing price of the previous day during opening auctions. During other auctions the comparison is made against the current last sale. If the order deviates more than a given threshold (%), the order will be rejected.
- The order price limit functionality is separate from PRM and is set market wide for all participants by the exchange. Fat finger price checks compare price instructions on incoming orders against a reference price. If the order deviates more than an order book configured parameter, the order will be rejected before it can execute.
Maximum Limits
Maximum limits on order values, order quantities and order rates create a safety net customized through administrator settings and provide the user the ability to check order volumes and rates.
- Maximum order quantity checks provide users the ability to check order volumes against a pre-set value.
- Maximum value checks control the maximum order value allowed on a per-order basis.
- Maximum accumulated value checks accumulate the order value throughout the current trading day. Once the volume hits the maximum configured value, new orders are rejected. Multiple accumulation checks are available.
- Maximum order rates limit the number of allowed orders per second on a per-port or symbol basis.
- Daily accumulated quantity checks accumulate quantity counters throughout the current trading day. Once the volume hits the maximum configured value, new sent orders are rejected. Multiple accumulation checks are available.
- Maximum order rate per second checks set limits on allowed orders/second rates on a per pre-trade limits group basis.
Restrictions/ Safeguards
Prevent trading on selected symbols or market segments, detect unusual repeated order generation patterns, restrict trading during auctions or access a kill switch for mass cancellation or orders.
- Restricted symbol and market segment list checks prevent trading on certain symbols or market segments. Any orders on symbols that are on the restricted list will be rejected. FTP bulk uploads of restricted symbols are available.
- Market order restriction during auctions restrict accounts that can place market orders during auctions.
- Restricted symbol and market segment list checks prevent trading on certain symbols or market segments. Any orders on symbols that are on the restricted list will be rejected.
- Repeated order generation checks detect unusual repeated order generation patterns and generates email notifications.
- Blow-through protection protects from triggering Nordic volatility guards.
- Kill switch for mass cancellation of orders (administrator) cancels all current orders.
- FIX drop on-disconnect safeguards cancel all open orders and prevents order entry in case of disconnect.
- Disconnect Safeguard: If the sponsor loses its connection, associated sponsored clients are blocked in the same way as if a limit is breached.
- PRM email notifications: PRM sends notifications when limits are breached or warning levels are reached.
Administration Interface
Access your PRM administration interface through the Member Portal to manage both global settings and restrictions on individual accounts. The PRM Administration interface is easy to use.
Use pre-trade risk management administration interface to:
- View and amend PRM account limits per currency for all checks intraday.
- Access emergency block/unblock of order entries for a PRM account.
- Cancel all open orders for a PRM account.
- Unlock a PRM account that has breached the limit for an accumulated value on a currency.
- Update PRM limits intraday.
The administration interface provides direct control of your PRM account configuration, including the ability to perform emergency actions.
Key Benefits with PRM
Low Latency
PRM adds no latency to order execution for high frequency and algo trading.
Facilitates Sponsored Access
Maintain control over trade flow for clients with sponsored access to trading.
Quick and Easy Implementation
PRM is a plug-and-play solution that is easy to implement. Set up your risk management and you are ready to go.