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Trade Management

Pre-Trade Risk Management - INET

Control Your Risk from Order Entry to Execution with Nasdaq Nordic Pre- trade Risk Management (PRM).

PRE-TRADE RISK MANAGEMENT (PRM) - NORDIC

In today’s marketplaces 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. As high frequency- and algo trading are replacing manual processes the need for automated control systems to reduce risk is increasing. Human errors, fat fingers and miscalculated algos can cost businesses millions of dollars and cause severe damages. At the same time speed of response and latency are getting more and more important, especially when algorithmic and program trading methodologies form the base of customers business. 

Benefits 

  • Ensure Market Integrity 
  • Minimal latency impact with a mix of pre- and post-trade controls 
  • Compliance with ESMA Guidelines 
  • Focus on highly automated trading flows
  • Facilitates Sponsored Access and low-latency DMA

PRE-TRADE RISK MANAGEMENT - INET

Nasdaq Nordic PRM service provides member firms with ability to facilitate pre-trade protection on INET Nordic. Using PRM, firms can have order level control of their trading activity and the trading activity of their clients and customers including prevention of potentially erroneous transactions. 

PRM validates orders entered via OUCH and FIX prior to allowing them into the matching engine. PRM is flexible, using a set of parameters to determine if the order should be allowed into the market.

PRM Protection in Brief

Fat Finger Price Check
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 Check during Auctions
It is possible to set an additional Fat Finger Price Check for a PRM account that allows you to 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 (%) set on the order book, the order will be rejected. 

Max Quantity Check
Provides users an ability to check order volume against a pre-set value. 

Max Value Check
Controls the maximum order value allowed on a per order basis.

Accumulated Value Checks
Accumulate the order value throughout the current trading day. Once volume hits the maximum configured value, new orders will be rejected. Multiple accumulation checks are available. 

Maximum Orders Rate
Checks Set limits on allowed orders/sec rates on a per port or symbol basis 

Repeated Order Generation Check
Detects unusual repeated order generation patterns and generates e-mail notifications 

Restricted Symbol and Market Segment List Checks
Allow users to prevent trading on certain symbols or market segments. Any orders on symbols that are on the restricted list will be rejected. 

Market Order Restriction during Auctions
It is possible to specify which PRM accounts are prohibited from using market orders during auctions. 

PRM E-Mail Notifications
PRM sends notifications when limits are breached or warning levels are reached. 

Blow-Through Protection
Protects from triggering Nordic Volatility Guards. 

FIX Drop On-Disconnect Safeguard
Cancels all open orders and prevents order entry in case of disconnect. 

PRM Administration Interface
Easy to use and free of charge interface available in the Nordic Workstation. It provides direct control of your PRM account configuration, including the ability to perform emergency actions. 

The interface allows PRM customers to: 

  • View and amend the PRM Account limits per currency for all checks - 
  • Intraday only emergency block/unblock of order entry for a PRM Account 
  • Cancellation of all open orders for a PRM Account 
  • Unlock a PRM Account that has breached the limit for an accumulated value on a currency 
  • Manage list of Restricted Symbol List per PRM Account. Including manual upload of a file .
  • Update their PRM limits intraday and/or for the next trading day
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