Eurex Clearing, the central counterparty (CCP) clearing house owned by exchange group Deutsche Börse, has launched Enhanced Risk Solution, a service providing members with real-time data about their risk positions and margin requirements.
The new service is part of Eurex Clearing’s risk management roadmap, under which the clearer aims to help members monitor and manage risk in today’s high-speed trading environment, characterised by increased use of execution algorithms and direct market access.
The service is available free of charge to Eurex Clearing’s trading and clearing members and covers all asset classes and products traded on the exchanges where Eurex Clearing acts as CCP. Asset classes covered include derivatives, cash equities, bonds and repo transactions.
The service distributes risk-relevant margin parameters, position information, overall margin requirements, detailed margin components, cash flows, the value of provided collateral and the respective margin shortfall or surplus. Eurex Clearing said the data allows members to perform real-time valuations of all open positions and transactions, enabling clearing members to monitor their non-clearing members and non-clearing members to control their risk exposure accurately.
According to Stefan Knoblauch, head of clearing business development at Eurex Clearing, firms typically take a snapshot of their positions and margin requirements a few times intraday and at the end of the day, but in today’s high-speed trading environment, this is no longer enough.
“With high-frequency trading activity it is now possible to accumulate a significant exposure in a very short period of time, which requires a change in risk management approach,” Knoblauch told theTRADEnews.com. “The old-style, batch-driven, couple of times a day snapshot is not really appropriate any more.”
Enhanced Risk Solution is based on open standards to allow users to tailor the data stream to suit their in-house applications. It is based on the Advanced Message Queuing Protocol for delivering messages and the FIXML format – the language used for creating FIX messages – for the application-layer messages.
As part of its risk management roadmap, Eurex Clearing migrated its internal risk monitoring to a real-time infrastructure in June 2009. The new system permanently recalculates risk data based on price changes and actual positions. Eurex Clearing also provides a ‘stop button’, which enables clearing and non-clearing members to delete all orders and quotes of the respective member and prevent further order and quote entry in emergency situations.
Further products are expected later this year, according to Knoblauch. “Towards the end of next year we will be introducing another risk improvement for our trading and clearing customers,” he said.