The risk limits component is embedded in InfoReach Trade Management (TMS) and HiFREQ systems. It provides risk assessment of every order request and ensures compliance with preconfigured firm-specific trading constraints. Risk compliance covers orders originated manually, algorithmically, via API, or via FIX.
The risk limits component offers many types of predefined risk checks and also allows customers to configure their own rules regarding how certain risk levels are being calculated.
System administrators can configure risk limit checks to apply to a specific user, group of users or all users.
Risk checks can be configured for various custom-defined categories. For example, one can define certain risk check rules for portfolio, strategy, account or global positions.
Risk limit rules can be assigned to specific instruments, all instruments or any instrument within specified Category.
Risk Limit Type
- Long Position – Start-of-day and intraday buys
- Short Position – Start-of-day and intraday sells
- Net Position – Start-of-day and intraday buys minus sells
- Gross Position – Start-of-day and intraday buys plus sells
- Intraday Long Position – Intraday buys
- Intraday Short Position – Intraday sells
- Intraday Gross Position – Intraday buys minus sells
- Open Long Position – Open buys
- Open Short Position – Open sells
- Open Net Position – Open buys minus sells
- Open Gross Position – Open buys plus sells
- Single Order Size – Checks the size of the order being send
- Single Order Liquidity (% ADV) – Checks the size of the order against percentage of the instrument ADV
- Single Order Price Away – Validates order limit price against some reference price.
- Interval Order Size – Ensures the total amount traded over a specific interval does not exceed a pre-set level
- Interval Order Count Size – Ensures the total number of orders sent over a specific time interval does not exceed a pre-set level
- Order Count – Ensures the total number of orders sent does not exceed a pre-set level
An administrator can use various methods for risk check calculations.
- Quantity – implies that calculation is done based on shares or contracts. For example, Open Long Position may not exceed 1,000,000 shares
- Value – implies that calculation is done based on the notional value. For example, Open Short Position cannot exceed 10,000,000 USD
- Percentage – order size check against ADV
- Absolute, Bps, Percentage of Spread, Percentage of Price or Tick – units for Single Order
- Price Away checks
Currency of the specified risk check.
Warning Threshold %
Percentage of the risk limit level at which the system issues a warning about approaching the risk limit.
Hard Limit by Target Price
When this rule is active the system ensures that no child order can be placed into the market with a price worse than the limit price of its parent order.
Broker Desk and Algo vs. Direct Market Access
InfoReach detects when trader attempts to send large market orders to the open markets rather to the broker's desks or algorithms and warns traders of the potential risk.