Managing trading risks with the help of RISQ solutions

Vladimir Kurlyandchik

Head of business development at Arqa Technologies
Views 790

Managing trading risks with the help of RISQ solutions

29.11.2014 05:23 pm

Q: What makes ‘RISQ solutions’ relevant today?

A: The need of controlling trading risks has been obvious for years but this hardly reduces its relevance. In fact, it becomes ever more crucial for survival and business development. There are also questions of compliance with MiFID II measures being introduced.

Q: What exactly are ‘RISQ solutions’ used for?

A: They are universal software solutions for efficient control of sell-side firms’ trading operations. The solutions for pre-trade control are conveniently adaptable to any broker infrastructure. They are multi-instrument, multi-market and may serve various business purposes allowing to service institutional and retail clients, engage in prop trading or service HFT-traders.

The solutions’ functionality facilitates various tasks – online position keeping, purchasing power control, halting ‘risky’ orders, margin call generation and dispatch. Relevant risk parameters are also conveniently visualized.

Q: Why solutions? How many are there?

A: The solutions for pre-trade control of transactions are divided into two groups that differ in application – for ‘standard’ and ‘low-latency’ infrastructures, the latter being optimized for those cases when trading latency is critical. In both applications computation of risks (based on working and filled orders and market updates) is performed by the risk server. Low latency transactions undergo pre-trade checks with the help of a separate module - RISQ filter that screens the trade flow based on latest risk server updates and other restrictions including ‘fat finger’ checks and flood control.

The general functionality including models of risk management is equally applicable to both standard and low latency approaches.

Q: What are the competitive advantages of ‘RISQ solutions’?

A: The principal advantage of using ‘RISQ solutions’ is the ease of application to whatever platform the broker uses. The flexibility of ‘Solutions’ makes their installation quite easy. ‘RISQ solutions’ are designed to function as an add-on to any broker platform.

The product is the result of our extensive experience in risk computation and risk mitigation developments. Controlling and limiting risks has been a huge priority for us as the developer of Russian software since the period of emergence and rapid development of Russian financial markets. Risks abounded, they were absolutely critical for our clients and this made us try very hard in order to come up with original solutions. Driven by tough challenges we were forced to learn to calculate trading risks ‘a little better’.

Following clients’ wishes the company made sure that risks were ‘visualized’ on user terminals making them easier to follow and control.

Q: What else differentiates ‘RISQ solutions’ form other risk management software?

A: ‘RISQ solutions’ are competitively priced and easy to use. Its application is not time consuming or resource-intensive. Standard integration and market data delivery is all that needs to be in place for operations. Sometimes even integration with the EMS in use is not required like in the case of QUIK KillSwitch for LSE.

We believe that there are obvious benefits to brokers that provide their clients with direct market access (sponsored access) to exchanges. Equipped with ‘RISQ solutions’ the broker would be able to efficiently control trading risks of such clients and provide them with wider trading opportunities and better terms of borrowing due to collateral optimization.

Q: Are ‘RISQ solutions’ used in Europe?

A: Definitely. ‘RISQ solutions’ have grown out of software developments for platform QUIK – the leading trading software in Russia. All international brokers of Russian origin that started out as players in Russian financial markets have been applying ‘RISQ solutions’ for trading at international markets.

It is also worth noting that leading global players through their representation in Russia have traditionally used the QUIK platform for trading in Russian financial markets. They are also employing approaches and elements which are integral to ‘RISQ solutions’.

Q: Are ‘RISQ solutions’ applications similar or do they differ from client to client?

A: The range of settings for ‘RISQ solutions’ is quite extensive. The selection of settings depends on a business model and business tasks of the broker. Combinations of settings selected by users are quite unique as they are customized to suit particular client needs.

Q: What do you think is the worst misconception in people’s attitude towards risk control?

A: It is a very astute question. For many people risk management is associated with dangers and possible negative consequences like losses. It is associated with extra expenditures because of the pressure to follow regulations. In my opinion, risk management should be viewed as an opportunity to conduct trading operations in a more efficient manner and expand your business through additional services offered to clients.

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