NEX Optimisation has helped shore up credit movements in the prime brokerage space with the launch of a new automated credit-rebalancing tool. The tool focuses on addressing limit over-allocation by prime brokers, having been designed in tandem with Citi.
NEX’s Rebalancer tool performs a plethora of functions for prime brokers. The latest FX risk solution to be rolled out by the group, the tool will oversee the allocation of credit across client trading venues. This includes the facilitation and deployment of credit in a more cohesive manner from one platform to another.
This is important for prime brokers given that transfers occur in real time, allowing for improved allocations even with excess credit on a platform. Previously, clients were able to move credit across platforms, however disparities with credit levels across multiple platforms presented difficulties that ultimately stifled cohesive movement.
Real-time credit distribution
In order to correct for this, Rebalancer helps leverage existing ECN limit capabilities to allocate credit wherever the client trades. Consequently, prime brokers are able to mitigate the amount of excess carve out at each ECN, which caps exposure in the event of a negative event such as a technical issue or faulty algorithm.
ACY Securities Supports ASIC’s Product Intervention OrderGo to article >>
Rebalancer went live earlier week across five leading ECNS, with additional platforms slated for deployment later this year. In addition to more streamlined credit use, the tool will be able to connect into another element of NEX Optimisation’s services suite, Traiana Designation Notice Manager.
By linking up with this service, Rebalancer will also allow for better management of designation notice limits. These notices are instrumental in identifying and communicating credit limits, along with which products and currencies a given client can trade – the service is widely adopted as a medium between FX prime brokers and executing brokers.
Rebalancer is the latest in a line of FX risk solutions that NEX Optimisation has implemented over the past five years. Prior tools include the introduction of CreditLink, Automated KillSwitch, the aforementioned Designation Notice Manager, triReduce CLS, and triBalance.
Sanjay Madgavkar, Global Head of FX Prime Brokerage at Citi, commented: “The development of Rebalancer is a very important milestone for the prime brokerage industry and we are very excited to see the product go live. This innovation will serve the needs of prime brokers as well as trading venues and clients, all of whom have an interest in enhancing risk management.”
“This is a further example of NEX Optimisation leading the way in risk mitigation in the FX market. Recent volatile markets and exceptional events have led FX prime brokers to intensify their focus on risk management. By allowing dynamic reallocation, Rebalancer will give these prime brokers further comfort, leading to more credit availability in the market as a whole,” reiterated Joanna Davies, Managing Director, Traiana.
The launch of Rebalancer is the second major update for NEX Optimisation this week, having earlier implemented its automated Settlement Netting Service. The OTC FX service was engineered to support bilateral settlement netting processes for market participants.