EXANTE slides from EXTENT conference,

1. February 2013
EXANTE
CROSS-ASSET PORTFOLIO MARGIN
RISK CALCULATION for HFT
Sergey Troshin, PhD,
Tech lead, Trading Platform

2. Contents
2
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.

3. EXANTE platform
3
• One client account for all products
• Trading terminal for Win, Mac, Unix
• FIX connection

4. 4
Presence in all major financial centres
• 50+ Exchanges
• 100K+ Instruments

5. 5
• 10+ data vendor gateways
• 10+ execution gateways

6. 6
Parallel trading via many Gateways
using one Account
=> Accurate risk control is needed

7. Current Risks
7

8. Initial startup
After each trade
Current Risks
8

9. Current Risks
9
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

10. Risks Requirements
10
• 100K symbols and 10K accounts
• Fast risk calculation, updates and checks
• Use orders data in risk processing
• Portfolio margin calculation
• Reasonable traffic (symbols + accounts)

11. Risks Proposal
11
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

12. Initial startup
Trade processing
Risks Proposal
12

13. Free Money
13
Account Margin =
SUM(Asset Margin) +
SUM(Cross-Asset Margin)
Asset Margin =
Quantity *
LeverageRate *
MarginCoefficient
Cross-Asset Margin = SPAN-like algorithm
for same underlying

14. Improvements
14
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

15. Proposed risks
15
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:

16. 16
Questions?
Sergey Troshin, PhD, Tech Lead (st@exante.eu)
www.exante.eu