However, electronic trading has also made it easier to trade remotely and on to a vast number of different platforms and exchanges. The prime brokers and FCMs have to be able to monitor all of this, and they have to be able to recognize when things are not as they should be. If risk-management procedures fail, the potential impact can be disastrous.
Rosenthal Collins, one of the world’s biggest independent FCMs, believes it has come up with an innovative solution. The Chicago-headquartered company has filed for a US patent on what it describes as a unique risk-management system. Called RCG RiskHunter, the system, which the company says it will deploy this quarter, has at its core complex event processing (CEP) technology.
Instant warning
The CEP engine, licensed from Coral8, has been integrated into RCG’s risk management platform by Connamara Systems. It incorporates complex algorithms, client trading information, live market data and RCG-defined parameters that in combination identify trading behaviour and pattern, regardless of how a trade is placed or on which market it is executed. RCG says it provides a virtually instantaneous warning if any of its clients pose a potential risk issue.
 |
“RCG RiskHunter is an indispensable technological tool that goes beyond our pre- and post-trade risk management processes to protect our clients, trading personnel and the firm,” Scott Gordon, RCG |
“RCG RiskHunter is an indispensable technological tool that goes beyond our already robust pre- and post-trade risk management processes to protect our clients, trading personnel and the firm,” says RCG’s chairman and chief executive, Scott Gordon. He adds: “Throughout the past year, we’ve seen unprecedented volatility across the financial and commodity markets to the point where a market can take a remarkable turn against a client in very short order.”
Gamechanger
Jim Downs, chief executive of Connamara Systems, says: “This has been a truly exciting project as I believe RCG RiskHunter will be a gamechanger for risk management in the futures industry. It completes the pre-trade and post-trade loop for risk management, enabling RCG to have a much faster view of potential issues than others in the industry and to view risk in ways that have never been accomplished before.”
Initially, the system will be used to monitor RCG’s clients’ activity in futures, which includes FX business on to both the CME and ICE. RCG also offers three different cash platforms. The company has yet to decide if it will be deployed to monitor activity on these, but it certainly has not ruled it out. “We’re finding that the RCG RiskHunter technology is so flexible and customizable that we can continuously modify the scope of the system to add new risk factors and algorithms that enhance what RiskHunter can do,” says Gordon.
For the moment, the company does not intend to license RCG RiskHunter, although this too cannot be ruled out for the future. However, RCG believes the system gives it a competitive advantage. “The tool not only provides protection for RCG but offers a competitive advantage in regard to clients and prospects, whose focus has increasingly turned to how their funds will be protected and who want to know that a firm has taken every step possible to protect their money from the activities of another customer,” he says.
