Why controlling your entire margin trading chain should be a top priority
Know the risk you trade, trade the risk you want
In the margin trading FX and CFD world, there used to be a time when brokers would not hedge any of their customers’ positions. As customers’ trading is not known to be often successful, to put it mildly, the best approach instead used to be not to hedge their positions at all and pray for the best for the broker and the worst for the customer. Tis hedging strategy, called “B-booking”, explains a large part of the returns of the industry. As a matter of fact the B-book approach, infrequently led to the worst for the broker. Even so, the market still remembers the broker who discovered in the morning a $400 mios position being run on a $20 mios company core capital. Any 5% move in EUR/USD would have wiped them out. Most brokers also know that in any given year, B-booking typically loses money about 2 months out of 12.
A new approach
Nowadays, brokers are looking for more sophisticated and intelligent hedging strategies. In order to meet the customer’s needs in a competitive environment, modern Position Keeping Systems with real-time risk monitoring and real-time management of these positions are mandatory. FinBird, a 100% subsidiary of 360T, has just rolled out its latest version of OWL Risk Management. OWL Risk Management, enables a broker to run A-booking, B-booking as well as more sophisticated strategies which not only follow positions in real time, but allow automated, algorithmic
management of the in-house position.
54 | april 2012 e-FOREX
Risk strategies defined by the broker are reliably and securely adhered to compliance rules therefore giving the management of such a business risk control assurance at all times.
FinBird’s full range of risk management tools include:
• Aggregation of feeds from multiple sources, banks or ECNs, giving independency from liquidity sources
• Monitoring and automated hedging of the house positions, according to various algorithmic hedging strategies. Moreover, hedging according to VAR limits is available.
• Monitoring of regulatory capital as a function of the risk profile, ensuring regulatory compliance.
• Monitoring of customers’ positions, automated close-out and roll over.
• Monitoring of connected clients, their equity, positions, orders, and available margins.
• Manual hedging of in-house and customers’ positions, giving maximum flexibility of manual optimisation
• Configurable email and SMS alerts, adding reliability to the system.
SPONSORED STATEMENT
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