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Foreign Exchange

HFT margin monitoring must be real-time, say FX prime brokers

High-frequency trading firms are increasingly relying on their prime brokers to monitor their credit limits in real time, says Noel Singh, head of prime brokerage at SEB.

Singh was speaking during a webinar organised by Traiana, the post-trade services group owned by ICAP.

Traiana operates the Harmony post-trade network for the foreign-exchange market. On Monday (June 27), Traiana announced a new partnership with several leading FX prime brokers and platforms, including Reuters and EBS, to help PBs better monitor the risks attached to providing credit intermediation and clearing services for HFT clients.

HFT firms are trying to use margin more efficiently, Singh says. “They’re flying closer to their limits,” he suggests, adding that HFT clients are increasingly demanding to see how close they are to their predefined limits in real time.

If HFT firms can see how near they are to their maximum exposure, Singh says, it makes it easier for them to go into wind-down mode. Steve French, director of product marketing with Traiana, says shutting off credit lines to clients will be easier for prime brokers that are part of Traiana’s Harmony network.

Gil Mandelzis, Traiana’s chief executive officer, told EuromoneyFXNews that the industry was moving closer a place where at “one stroke of a button, within less than a second,” client activity could be terminated across multiple electronic platforms.

“FXPB is not a riskless business when prime broking for HFT clients,” Mike Irwin, co-head of prime brokerage at Morgan Stanley in New York, adds. “We have procedures, limits and controls in place to reduce this risk and Traiana's solution will help reduce it further.”


Irwin sees the new Traiana service, called Harmony CreditLink, as a significant enhancement because FX trading is fragmented across lots of different trading venues, so in the event of a situation whereby an HFT firm exceeded their pre-defined limits, having a central place to action a termination of trading for a particular counterparty would save a lot of time for prime brokers, he says.

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