The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Delaying The Inevitable

Bowing to market pressure, it seems that the SEC has given the financial trading community a little extra time to implement certain aspects of the so-called Market Access Rule covering pre-trade risk. Instead of a July 14 deadline, trading firms, brokerages and exchanges now have a November 30 date to work to for implementing aggregate risk checks, and for all fixed income trades. But the original deadline for checks on individual equities trades stands, so it may still be work instead of BBQ for many IT folk over this holiday weekend.

It seems that a number of market participants were unhappy with the tight deadline for the more complex requirements of a new regulation – officially numbered 15c3-5 – which require the implementation of various compliance checks on customer orders flowing through their automated “sponsored access” systems. Indeed, there was much debate about the readiness of the community at our recent “Business & Technology of Low-Latency Trading” event in New York City. The problem is not just one of performing the required checks, but performing them without adding significantly to latency.

That said, a few of the bigger firms – Deutsche Bank, Morgan Stanley and Nomura among them – have been touting their order routing systems as ready now for the new rule, and are claiming that the checks add just two or three microseconds of latency. And exchanges including NYSE Euronext and Nasdaq OMX also provide pre-trade risk checks as part of their access gateways.

Other firms – such as Lime Brokerage – are making pre-trade risk functions available to others as a service, via the BT Radianz network, while the likes of SunGard has built compliance checks into its Valdi trading network, leveraging technology from StreamBase Systems. Fixnetix also recently announced iX-eCute, a hardware accelerated trading system, which executes 20+ pre-trade risk checks in less than 100 nanoseconds.

The bottom line, then, is that compliance with the new rule is do-able. But the big firms will leverage their technology prowess and budgets to implement the fastest systems, while a raft of tier 2 firms will likely rely on others to do the heavy lifting, and likely offer checks that take a little bit longer.

Related content

WEBINAR

Recorded Webinar: Managing LIBOR transition

The clock is ticking on the decommissioning of LIBOR towards the end of this year, leaving financial institutions with little time to identify where LIBOR is embedded in their processes, assess alternative benchmarks and reference rates, and ensure a smooth transition. Some will be ahead of others, but the challenges are significant for all as...

BLOG

Surveillance 2.0 – Turn Up the Signal, Wipe Out the Noise

By Joseph Schifano, Global Head of Regulatory Affairs, Eventus Systems. Trade surveillance is a complex discipline, dependent on the processing and filtering of masses of data. Its mandate is constantly increasing too, with the relentless iterations of regulatory and market change demanding the monitoring of more asset classes across more business lines and against an...

EVENT

Data Management Summit Virtual

The Data Management Summit Virtual brings together the global data management community to share lessons learned, best practice guidance and latest innovations to emerge from the recent crisis. Hear from leading data practitioners and innovators from the UK, US and Europe who will share insights into how they are pushing the boundaries with data to deliver value with flexible but resilient data driven strategies.

GUIDE

ESG Handbook 2021

A-Team Group’s ESG Handbook 2021 is a ‘must read’ for all capital markets participants, data vendors and solutions providers involved in Environmental, Social and Governance (ESG) investing and product development. It includes extensive coverage of all elements of ESG, from an initial definition and why ESG is important, to existing and emerging regulations, data challenges...