Risk Management

Pre- and At-Trade Risk Management: TradeGuard

Manage risk, boost market integrity and protect your enterprise.
Risk Management

Nasdaq’s TradeGuard offers a real-time, multi-tiered risk solution

TradeGuard minimizes latency impact while maximizing protection of clearing firms, market participants and market operators.
Market structure failures in the not too distant past, like the 2010 “flash crash”, have heightened regulators’ interest in pre-trade risk controls and have clearly created a requirement for market participants and market operators alike to bolster their risk management capabilities. Market operators today must put processes in place to ensure that toxic flow is prevented from entering the marketplace to ensure market integrity. While organizations know they need these added controls, they know these controls can elevate operational cost, and can impact latency, affecting execution speed and quality. 
Nasdaq’s TradeGuard suite of products offers a real-time, multi-tiered risk solution that integrates pre-, at- and on-trade risk management, including margining. The flexible solution, which is proven and in use by 4 marketplaces today, resides natively within a market’s matching engine. Its open architecture enables placement of risk checks in whichever location will work best with the market’s business strategy: pre-trade, at the match or post-trade. By setting exchange-wide limits at one of these locations, TradeGuard solutions help market operators to better control their market health by ensuring all market participants are meeting pre-defined parameters. Additionally, risk checks cover cross-asset, cross-market analysis and are designed for low-latency so that member execution speed is not severely impacted.
TradeGuard solutions are suitable for use by clearinghouses, exchanges, inter-dealer brokers and execution venues of all sizes, and seamlessly ties into both Nasdaq trading platforms and third party or propriety trading and clearing solutions. Some key use cases include:

  • Sponsored Access: Designed to ensure end-clients adhere to sponsoring brokers limits
  • Clearing Certainty: Designed to control credit consumption and margin availability with ability to clear trading positions to protect the CCP or GCM
  • Exchange Guards: Designed to safeguard market health by ensuring market participants meet exchange-set limits

TradeGuard helps markets:

  • Minimize latency impact while maximizing protection
  • Balance risk management needs related to speed, cost, safety with flexible placement of risk checks 
  • Optimize capital efficiency through cross-asset margining and a single collateral pool
  • Easily integrate using TradeGuard’s open, standards-based interfaces to connect to proprietary, third-party and other Nasdaq solutions
  • Leverage proven technology 

Feature Highlights:

  • Open architecture that allows for different risk checks in different tiers to meet specific business requirements and all relevant use cases
  • Pre- and At-trade risk checks reside natively within the matching engine and introduce typically less than 2* microseconds in latency
  • On-trade risk infrastructure optionally ties into real-time margining engine for improved capital efficiency
  • Pre-trade risk connects into post-trade for additional real time margin checks
  • Wide variety of risk checks available for margin checks, daily quantity checks and “fat finger” checks 
  • Available “hot” redundancy ensures no “failover” is required if one instance experiences an issue
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