Pre-trade Risk Management

Pre-trade risk management

Euronext RiskGuard aims to provide Risk Managers at Clearing Member firms and Trading Member firms with the ability to set pre-trade risk controls in order to manage their customers’ or trading firm’s risk exposure in real-time. This complements the Members’ and Clearing Members’ own pre-trade risk management systems already in place.

Pre-trade risk controls

Pre-trade risk controls as part of the Euronext RiskGuard service are being made available for Euronext Derivatives markets through a FIX 5.0 API and a web-based User Interface (GUI).

Euronext RiskGuard will cover not only MiFID II regulatory requirements but will offer extended risk control and analysis features. It will also be expanded in time to cover all asset classes of Euronext cash and derivatives markets including AtomX, Euronext’s platform for reporting off-orderbook, on-exchange trades.

Phase 1

The following pre-trade risk controls are available for the Euronext Derivatives Markets:

Kill Switch

The Kill Switch feature provides Risk Managers at Clearing Member firms with a fast and efficient way to halt trading activity at the Exchange level in the event that a trading firm breaches its obligations to its clearer.

The functionality is similarly provided to Risk Managers at Trading Member firms to halt trading activity for their trading firm, for a group of ITMs, or for an individual ITM.

All open orders and quotes of the impacted entity will be pulled. Any attempt to submit further orders will be rejected until the Risk Manager explicitly reinstates the trading status of the trading firm, the group of ITMs or the ITM by sending an ‘Unsuspend’ command.

For further information, please refer to the RiskGuard General Overview document in the Resources section on this page.

Phase 1

Order Size Limit

The Order Size Limit control provides Risk Managers with the ability to set a maximum number of contracts that can be bought and/or sold per order. The limit can be set for the whole trading firm, a group of ITMs or a particular ITM at different levels:

- All Futures and/or Options contracts with a specific Exchange Code

- At the contract level.

For further information, please refer to the RiskGuard General Overview document in the Resources section on this page.

Phase 1

Contract Restriction

The Contract Restriction (so-called ‘Block’) control provides Risk Managers with the ability to prevent a trading firm, a group of traders, or a particular ITM from submitting orders in a particular Futures or Option contract. An additional option is given to Risk Managers to pull resting orders at the time when the control is triggered.

For further information, please refer to the RiskGuard General Overview document in the Resources section on this page.

Phase 1

Daily Exposure Management

This control provides Risk Managers with the ability to define a daily Maximum Exposure Position (MEP) limit expressed in number of lots on a per contract basis. Risk Managers are provided the ability to define threshold alerts and preventive actions aimed at limiting the risk to breach the MEP limit.

For further information, please refer to the RiskGuard General Overview document in the Resources section on this page.

Phase 2 and beyond

In Phase 2, and subsequent phases, Euronext RiskGuard will be expanded to offer additional pre-trade risk controls through the FIX 5.0 API and the web-based User Interface (UI).

This service will also be expanded to cover all asset classes of Euronext cash and derivatives markets including AtomX, Euronext’s platform for reporting off-orderbook, on-exchange trades.