BATS Offers Risk Tools and 'Kill Switches' to All
Traders Magazine Online News, November 28, 2012
BATS Global Markets rolled out a suite of no-cost risk management tools to all U.S. equities and equity option markets customers.
Providing the lowest latency for inbound orders is the claim of new risk management tools that BATS Global Markets offers equities and equities options clients.
The customizable port-level risk management tools, which had previously only been available to sponsoring members, give clients pre-trade risk protection, BATS officials said.
Users members set order restrictions, maximum per-order limits, and order cutoffs, or a member controlled "kill switch." These cancel all open orders and block new orders. By offering the tools for free, one might expect there to be an increase in latency for inbound orders. But that's not so, according to BATS.
The universal offering of the risk management tools appears to be in response to recent problems surrounding the unwanted or unchecked execution of orders. One such unchecked execution happened when Knight Capital executed an order incorrectly and caused at $457 million dollar loss. Knight needed an emergency cash infusion to survive.
"We believe that a multilayered approach to risk management, with various risk checks in place both on the member and exchange side during the life of an order, is fundamental to ensuring markets remain resilient," BATS Global Markets president and chief executive CEO Joe Ratterman said in a release.
"Providing universal access to these types of risk management tools at no cost to our members supports our mission of making markets better."
The risk management controls can be viewed and configured through a secure Web interface, the BATS Member Web Portal, or automated and systemically controlled through the BATS Secure Web API.
Ratterman added that the risk controls and kill switch functionality will go a "long way" to responding to customer demand for exchange specific risk mitigation. He also said the exchange remains committed in both the U.S. and Europe to the potential development of market-wide risk controls that could further improve the market's safe functioning as well as increase investor confidence.
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