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Pre-trade risk measures

Pre-trade risk measures

The pre-trade risk controls we offer are the first step in helping Members to manage their risk. These tools offer Members flexibility in setting intelligent limits that reflect their risk profiles. Furthermore, they are part of our ongoing commitment to safeguarding the marketplace.

Advanced Risk Protection

In response to industry demand for enhanced intraday risk monitoring, Eurex Clearing offers a pre-trade risk management service that enables Members to define individual risk limits for themselves or their associated Trading Participants (NCMs). These limits are based on actual calculations and result in various pre-trade actions without latency impact.

The limits are evaluated against corresponding risk figures being conveyed in real-time via the Enhanced Risk Interface and any breach of a set limit can result in the restriction of further trading activity, as pre-defined by the Clearing Member or their associated Trading Participants.

Keep an eye on your risks

Our Enhanced Risk Solution allows you to monitor your risk exposure in real-time. And with margin coverage shown immediately, risk managers encounter fewer surprises.

 
 

How limits are defined

All Members can select from four pre-defined metrics. Each represents a different aggregate of risk values, described below:

  • Total exposure (TMR) = Total margin requirement
  • Profit and loss (CULI) = Premium margin + current liquidating margin + variation margin + option premium
  • Cash flow (CASH) = Variation margin + option premium
  • Market risk (NDM) = Additional margin + futures spread margin

Available actions

These new limits encourage Members to set risk limits in advance to proactively safeguard trading activities. Members specify which of three actions will be implemented when a breach of each level or risk limits occurs.

Level 1: An alert message is broadcasted to both the NCM and its respective Clearing Member.

  • An additional checkbox is available for Members to configure an automatic delete of all open orders and quotes.

Level 2: The system automatically slows down a Participant's order/quote entry and order/quote modification by enforcing a minimum delay between non-delete transactions in any single product.

  • Minimum delays can be configured between 250 and 5,000 milliseconds. Setting the level to zero deactivates the feature.
  • An additional checkbox is available for Members to configure an automatic delete of all open orders and quotes.
  • An additional checkbox is available to restrict order entry to 'Persistent Orders Only'.

Level 3: The Member's trading state is set to "halt":

  • All open orders and quotes are deleted.
  • All trading and clearing functions are prevented.

However, when both a GCM and an NCM both set limits, the more restrictive limits will hold.

Changing limits & timelines for settings

The Advanced Risk Protection service is based on the same data that is distributed via the Enhanced Risk Interface. This enables Members to implement additional risk monitoring metrics that are more complex as well as tailor-made, on same data source.

Members can set risk limits using the Clearing GUI provided by Eurex Clearing. When Members use the GUI to enter and/or change risk limits, the new limits become valid as of the next business day. Changes to other parameters (delay; order/quote delete) are effective immediately.

Only Enhanced Risk Interface users can make intraday changes to their risk limits. Changes initiated via the Enhanced Risk Interface are effective only for the current day and will be overwritten with limits defined in the Eurex Clearing GUI being valid as of the next business day. If this override is not desired, the respective limit change must also be done via the GUI.

In combination with the real-time risk monitoring service provided by the Clearing House's Enhanced Risk Interface, our Members now benefit from an even broader set of risk management tools.

Maximum Order Quantity

Clearing Members may pre-define per Non-Clearing Member on a product level the limits a given Member may have in specific product. The maximum quantity is defined per order. In case the Clearing Member assigns a quantity of zero for a specific product, the Non-Clearing Member is not permitted to enter orders for that product into the Eurex® system.

Contact

Eurex Clearing AG | London Office
Clearing Business Relations

T +44 207 8 62-76 56