Primarily servicing buy side firms and non-bank FX liquidity providers with its low latency trading systems and risk monitoring solutions since 2009, Fluent Trade Technologies is launching FluentPrime 3.3 in a bid to enter the technology services space for FX prime brokers. Speaking to Forex Magnates, Fluent Trade Technologies’ Managing Partner, Gil Neihous, explained that many prime brokers rely on post-trade monitoring solutions to review aggregated customer positions among the various venues they provide client credit to. As a result, Neihous added that this process causes them to be vulnerable to credit risks if a customer enters simultaneous orders to many venues where the value of aggregated positions are well above their total credit allotment.
In the company’s statement promoting FluentPrime 3.3, Fluent Managing Director, Joel Steinmetz, explained the risks by saying, “The current available solutions for FX Prime Brokers relies on an irrelevant post-trade risk management methodology – a clear recipe for a credit disaster. Do the math: A small $1M hedge fund with direct access to 10 venues (with 50x credit per venue), presents a $500M risk exposure for the prime broker in the ever-more-common event of an algorithm trading glitch. There is no real time credit aggregation, and no way to block a rampant algorithm or a software error.”
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According to Fluent, to provide a solution for limitations in post-trade monitoring products, FluentPrime 3.3 operates as a pre-trade surveillance service that aggregates total customer positions as they occur, without the need for receiving data from the post-trade services such as Traiana’s Harmony network. The result is the ability for prime brokers to restrict customer trading quicker; thereby providing additional risk measures. Neihous explained further to Forex Magnates that “we have unified the risk and our execution gateway to be single module ,also we reduce the latency for the risk checks to 1.8 microseconds. The main advantage is that the risk engine sits by the client and the prime broker feed the risk parameters to the engine.”
Prime broker risk control has become a hotter topic of late due to the exit of Rabobank from the FXPB space following reports of losses they experienced due to limitations in their technology. With the majority of Rabobank’s customers continuing to look for a home for their accounts, it has caused prime brokers to evaluate their products for technical holes that could expose them to risks from high-frequency and algorithmic trader customers which Rabobank was known to have.
In terms of Fluent’s offering, among FluentPrime’s features include an irreversible kill switch, ability to control outstanding open orders, customer configuration rules such as orders per second and individual currency limits, and guaranteed messaging protocol.