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EXANTE
                CROSS-ASSET PORTFOLIO MARGIN
                       RISK CALCULATION for HFT

                     ...
Contents
1. Broker for algorithmic traders
  Internal architecture overview

2. Current risk scheme and its drawbacks
  Pr...
EXANTE platform



• One client account for all products
• Trading terminal for Win, Mac, Unix
• FIX connection


        ...
Presence in all major financial centres
• 50+ Exchanges
• 100K+ Instruments

                                          4
• 10+ data vendor gateways
• 10+ execution gateways
                             5
Parallel trading via many Gateways
                               using one Account
=> Accurate risk control is needed    ...
Current Risks




                7
Current Risks
Initial startup




After each trade




                             8
Current Risks
Pros:
• Simple and extremely fast Gateway

Cons:
• Limits update are not fast enough because of
  heavy calc...
Risks Requirements
•   100K symbols and 10K accounts
•   Fast risk calculation, updates and checks
•   Use orders data in ...
Risks Proposal
SymbolLimit = FreeMoney * LeverageRate *
  CrossCourse / Price
Definitions
• MarginCoefficient = CrossCours...
Risks Proposal
Initial startup




Trade processing




                            12
Free Money
Account Margin =
  SUM(Asset Margin) +
  SUM(Cross-Asset Margin)

Asset Margin =
  Quantity *
  LeverageRate *
...
Improvements
1. Move free money calculation to Risk Agent.
   Orders synchronization is needed.

2. Compute free money usi...
Proposed risks
Pros:
• Gateway is still very fast(<1ms)
• Orders are used in limits calculation
• Portfolio Margin can be ...
www.exante.eu

        Questions?

Sergey Troshin, PhD, Tech Lead (st@exante.eu)


                                       ...
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Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 1 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 2 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 3 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 4 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 5 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 6 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 7 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 8 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 9 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 10 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 11 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 12 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 13 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 14 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 15 Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT Slide 16
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Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT

EXANTE - "Cross-Asset Portfolio Margin Risk Calculation for HFT"

Sergey Troshin, PhD, Tech lead, Trading Platform

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Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT

  1. 1. EXANTE CROSS-ASSET PORTFOLIO MARGIN RISK CALCULATION for HFT Sergey Troshin, PhD, Tech lead, Trading Platform February 2013
  2. 2. Contents 1. Broker for algorithmic traders Internal architecture overview 2. Current risk scheme and its drawbacks Problems by design. Implementation problems. 3. Risk calculation and control proposal Cross-asset portfolio margin risk management in near real time mode. 2
  3. 3. EXANTE platform • One client account for all products • Trading terminal for Win, Mac, Unix • FIX connection 3
  4. 4. Presence in all major financial centres • 50+ Exchanges • 100K+ Instruments 4
  5. 5. • 10+ data vendor gateways • 10+ execution gateways 5
  6. 6. Parallel trading via many Gateways using one Account => Accurate risk control is needed 6
  7. 7. Current Risks 7
  8. 8. Current Risks Initial startup After each trade 8
  9. 9. Current Risks Pros: • Simple and extremely fast Gateway Cons: • Limits update are not fast enough because of heavy calculations on Back Office side • Orders data are encapsulated in Gateway • Portfolio Margin is not calculated • High BO=>RA traffic (symbols * accounts) • Gateway restart takes significant time • Possible inaccurate limits 9
  10. 10. Risks Requirements • 100K symbols and 10K accounts • Fast risk calculation, updates and checks • Use orders data in risk processing • Portfolio margin calculation • Reasonable traffic (symbols + accounts) 10
  11. 11. Risks Proposal SymbolLimit = FreeMoney * LeverageRate * CrossCourse / Price Definitions • MarginCoefficient = CrossCourse / Price (initial margin to open position with quantity set to 1 and leverage rate set as 1) Facts • Margin Coefficient doesn’t depend on account • LeverageRate is the same for many accounts • CrossCourse and Price can not change 11
  12. 12. Risks Proposal Initial startup Trade processing 12
  13. 13. Free Money Account Margin = SUM(Asset Margin) + SUM(Cross-Asset Margin) Asset Margin = Quantity * LeverageRate * MarginCoefficient Cross-Asset Margin = SPAN-like algorithm for same underlying 13
  14. 14. Improvements 1. Move free money calculation to Risk Agent. Orders synchronization is needed. 2. Compute free money using cross margining info 3. Use margin data in ATP 14
  15. 15. Proposed risks Pros: • Gateway is still very fast(<1ms) • Orders are used in limits calculation • Portfolio Margin can be calculated in different ways • Cross margin data could be used • All limits and leverage rates could be overridden • Fast as light risk updates • Backup gateways Cons: 15
  16. 16. www.exante.eu Questions? Sergey Troshin, PhD, Tech Lead (st@exante.eu) 16

EXANTE - "Cross-Asset Portfolio Margin Risk Calculation for HFT" Sergey Troshin, PhD, Tech lead, Trading Platform

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