Trading technology: RCG hunts for risk management
Foreign exchange prime brokers and their exchange-traded product counterparts, the full commission merchants (FCMs), will be fully aware of the complexities involved in modern risk management. To an extent, the uptake of electronic trading has made their task far easier – there are clear audit trails, and trade confirmations are, in most cases, sent out in almost real time.
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.
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.