This document proposes a new risk calculation and control system for an algorithmic trading platform to address drawbacks in the current system. [1] The current system has slow risk limit updates, does not calculate portfolio margin, and has high traffic between the broker and risk agent. [2] The new proposal would move risk calculation to a risk agent to enable near real-time cross-asset portfolio margin risk management using order data. [3] This would allow for faster risk limit updates, calculation of portfolio margin, and reduction of traffic between the broker and risk agent.
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Extent 2013 Obninsk Cross-Asset Portfolio Margin Risk Calculation for HFT
1. EXANTE
CROSS-ASSET PORTFOLIO MARGIN
RISK CALCULATION for HFT
Sergey Troshin, PhD,
Tech lead, Trading Platform
February 2013
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.
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3. EXANTE platform
• One client account for all products
• Trading terminal for Win, Mac, Unix
• FIX connection
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4. Presence in all major financial centres
• 50+ Exchanges
• 100K+ Instruments
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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
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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)
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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
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
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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. www.exante.eu
Questions?
Sergey Troshin, PhD, Tech Lead (st@exante.eu)
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