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How can technology make HFT less risky without affecting low latency and high capacity?

How can technology make HFT less risky without affecting low latency and high capacity? Vladimir Kurlyandchik Director of business development. arqa.ru. arqa.ru. Perception of risk. Common view of HFT risks. Technological danger. Trading system capacity & communication lines overload.

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How can technology make HFT less risky without affecting low latency and high capacity?

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  1. How can technology make HFT less risky without affecting low latency and high capacity? Vladimir Kurlyandchik Director of business development arqa.ru

  2. arqa.ru Perception of risk Common view of HFT risks Technological danger Trading system capacity &communication lines overload Money risks Price levels & fast losses Risk-management = “fat finger” checks

  3. arqa.ru HFT’s classic points “Weadd liquidityandincrease efficiencyof the market” “Wemake moneyusingminimal spreads” “Weinvest a lot of moneyintotechnological development”

  4. arqa.ru Typical HFT’s strategies 1. Market-making 2. Stat arb

  5. arqa.ru Arbitrage & collateral » Opposite directions positions with high correlation No big market risk BUT In practice: separate collateral for each leg

  6. arqa.ru Face to HFT Risk-managementcanimproveyour business

  7. arqa.ru Disbalance nature Typical view: Risk calculation increases latency! What is better for your client? Understanding the client’s trading pattern

  8. arqa.ru Technology is here Client Pre-trade control Trading Venue Risk Server

  9. Risk Server arqa.ru Technology is here Client Pre-trade Control Module Trading Venue yes / no » High latency Low latency

  10. arqa.ru Technologyrequirements Orders and trades drop copy Market data High speed of data receiving

  11. arqa.ru Risk-management techniques » 1. Margin trading 2. Portfolio margining (SPAN-like approach) 3. Netting of local shares and ADR/GDR 4. Netting of equity and derivatives positions 5. Unified money account for all markets » A. Multi-currency support B. Working orders accounting C. All commissions accounting

  12. arqa.ru Control accuracy Using real latency for concrete infrastructure Flood control and order volume control to prevent exceeding maximum value P&L checks and checks for allowed instruments

  13. arqa.ru Business results » Client does moretrading Exchange and broker get more commissions » Client saves moneyon funding, reducescost of operation and complexity of algorithms Efficiency improves

  14. arqa.ru Different infrastructures – different solutions

  15. arqa.ru Conclusion Don’t fear! Find the balance of interests!

  16. arqa.ru Thank You! Questions?

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