The clearing arm of European derivatives exchange Eurex has launched Advanced Risk Protection, a new real-time, pre-trade risk management tool, to help manage high-speed trading on its market.
The service allows clearing members and non-clearing members of Eurex to control their trading and operational risks by setting pre-trade limits on aggregate risk metrics.
All members will have the ability to define their own level of protection in terms of total exposure, profit and loss, cash flow or market risk covering both futures and options positions. Clearing members will be able to set limits for non-clearing members.
Members can also choose how the solution reacts when a breach of the risk parameters occurs, either by having an alert message sent to the respective clearing member, through an automatic throttling of orders and quotes, or by halting all trading activities.
According to Eurex, which is jointly owned by German exchange group Deutsche Börse and SIX Swiss Exchange, these aggregated risk measures will provide flexibility to adequately reflect individual risk management practices and trading patterns.
“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”, said 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.”