Low-latency and enterprise data provider Activ Financial has unveiled a new service offering, dubbed Activ TradeDeck, in collaboration with trading technology vendor Fundamental Interactions and capital adequacy and credit risk management software supplier Softek, that combines low-latency market data, pre-trade risk checks, order routing and credit risk controls, to help broker-dealers comply with regulations governing direct market access.
Activ already offers TradeDeck in the US—in partnership with Fundamental Interactions and Softek—to help firms comply with theSecurities and Exchange Commission’s 15C3-5 rule around risk controls for firms with market access, and is now expanding it to Canada, where the solution is in final testing with a few large brokers ahead of the March 1 deadline for having a plan in place for implementing a pre-trade risk solution and the May 31 deadline for implementing the solution, as required by regulations from the Canadian Securities Administrator (CSA) and Investment Industry Regulatory Organization of Canada (IIROC), says Will Kennedy, executive vice president of global strategy and business development at Activ.
Activ contributes the market data, hosting and connectivity for TradeDeck, while Fundamental Interactions provides pre-trade risk checks and controls as well as order routing, and Softek provides post-trade credit monitoring and margin calculations, which are incorporated back into the pre-trade risk models. “At any point in the front end, [brokers] are working with the most up-to-date set of limits that can be set and managed with their clients,” Kennedy says.
TradeDeck provides support for multiple asset classes—currently US and Canadian equities, options and futures, with plans to expand coverage to include foreign exchange and fixed income, Kennedy says.
The cross-asset and cross-market view is crucial when monitoring credit risk, says Softek chief executive Robert Bond. “Banks want to know the total counterparty risk, and be able to feed that back into their pre-trade processes,” he says. “One of the things this three-way partnership delivers is a unique capability for us in the Softek margin world to accumulate a global picture of the outstanding credit requirement, and feed that back into the pre-trade processes—such as for setting buying power limits—on a continuous basis throughout the trading day.”
TradeDeck provides all the checks required by the CSA, IIROC and SEC rules, including single order limit checks, throttle and duplicate order checks, as well as checks that upcoming regulation from the Commodity Futures Trading Commission will require for futures trading, and includes controls for setting a “kill switch” and short-selling restrictions, says Shawn Sloves, chief executive of Fundamental Interactions.
Clients can roll out TradeDeck as a hosted solution or deployed on-site, with Activ serving as the single point of contact for service and providing primary support, with second and third-level engineering support provided by the other vendors as necessary, says Activ president Frank Piasecki. “The consistent feedback from customers reacting to this regulatory shift is that… the solution to this is complex around many different competencies, so it’s not easy to gather them together. This is a best-of-breed approach in response to the market. Without compromising on performance and stability, firms also don’t have to manage these capabilities on their own,” he adds.