The SEC today proposed plans to overhaul procedures and rules regarding what is currently dubbed unfiltered or âNaked Accessâ in the financial industry. The proposed rule would require brokers with market access to put pre-trade risk controls on a practice known as "sponsored access."
SEC Chairman Mary Schapiro compared Sponsored Access to giving âcar keys to a friend who does not have a license and letting that friend drive unaccompaniedâ. This issue, according to the SEC, could be addressed by monitoring and filtering orders pre-trade rather than post-trade, as is often the case today.
Concretely, this ruling would mean that brokers may soon be required to place "pre-controls" on certain kinds of trading to ensure that customers don't, as the SEC put it, ârun roughshod over markets and exchangesâ and threaten overall systemic market stability.
ULLINKâs fully-managed DMA trading infrastructure, UL NET+ powered with the UL IRIS pre-trade risk management component, allows clients the type of pre-trade management the SEC is expected to mandate once the proposal becomes a ruling. Using UL NET+, the sponsoring brokers can filter their clients order flows ahead of market execution.
âOur fully-embedded, one-process architecture enables our clients to achieve the entire execution cycle at unparalleled speeds, through advanced fiber optic connectivity and collocation with the worldâs largest exchangesâ says Laurent Useldinger, CEO of ULLINK. âThis unique solution provides pre-trade filtering and direct order routing to the worldâs largest equities and derivatives markets.â
UL NET+ is a global infrastructure of DMA gateways, fully hosted and managed by ULLINK and co-located with the exchanges wherever possible for optimal performance. Using fiber-optic connectivity and the latest hardware, UL NET+ is monitored 24/7 by ULLINK experts, meaning both the sponsoring brokers and their buy-side clients can focus on trading and monitoring their business.
UL IRIS is a comprehensive solution for pre-trade risk control. UL IRIS helps easily build and manage risk policies across asset classes and provides member firms with the ability to set a wide range of filters to facilitate pre-trade protection across markets.
âOur pre-trade risk filtering component is ready to address the SECâs concerns, and offers brokers the safety net they need when sponsoring their buy-side clients for direct market access. Furthermore, as UL NET+ achieves high-frequency trading across asset classes without sacrificing control, we have no doubt this solution has no broker neutral competition on the market todayâ, concludes Useldinger.