‘Rebalancer’ enables dynamic allocation of credit across ECNs
NEX Optimisation, which helps clients reduce complexity and optimise resources across the transaction lifecycle, announces today that it has launched an automated credit rebalancing tool that specifically addresses limit over-allocation by prime brokers. Rebalancer went live across five major ECNs on 2 July 2017, with further platforms going live throughout the year.
Designed in close partnership with Citi, Rebalancer enables dynamic allocation of credit across client trading venues, enabling clients to move credit from one platform to another in real time. Prime brokers currently allocate credit to multiple trading venues but do not have the ability to move it around if there is excess credit on one and a shortage on the other. Rebalancer leverages existing ECN limit capabilities to dynamically allocate credit wherever the client trades.
Rebalancer considers the clients overall net position across all venues. If the client has offsetting positions, that is if they have directional positions on each platform but are flat overall, then Rebalancer automatically extends credit. Once the net position is no longer flat, the rebalancing tool withdraws this credit. As a result, prime brokers can extensively reduce the amount of excess carve out at each ECN, capping exposure in the event of a negative event such as a technical issue or faulty algorithm.
Rebalancer will also allow for dynamic management of designation notice limits via connectivity to NEX Optimisation’s Traiana Designation Notice Manager service. Designation notices communicate the credit limits, permitted products, currencies and tenors a client can trade. Designation Notice Manager is the industry standard for electronically negotiating, exchanging and monitoring designation notices between FX prime brokers and executing brokers.
Rebalancer is the latest FX risk solution that NEX Optimisation has launched over the past five years. Recent services include:
- - CreditLink: a credit-monitoring tool for prime and executing brokers which monitors overall credit lines, as well as carve-outs to different venues.
- - Automated KillSwitch: KillSwitch extends CreditLink and allows prime brokers to instantaneously and automatically disable ECN liquidity for end-clients in breach of overall credit lines.
- - Designation Notice Manager: a central and electronic repository of Master Give Up agreements and related designation notices, this solution allows customers to streamline the setup, amendment and termination of client give up lines from a resource-intensive, manual and error-prone exchange of paper documents to a centrally maintained, fully electronic platform.
- - triReduce CLS: forward FX compression allowing customers to enhance capital efficiency and leverage ratios, manage counterparty credit risk and reduce operational risks and costs by eliminating notional principal and offsetting bilateral exposures.
- - triBalance: counterparty credit risk optimisation resulting in reduced capital and funding costs.
Sanjay Madgavkar, Global Head of FX Prime Brokerage at Citi, said: “The development of Rebalancer is a very important milestone for the prime brokerage industry and we are very excited to see the product go live. This innovation will serve the needs of prime brokers as well as trading venues and clients, all of whom have an interest in enhancing risk management.”
Joanna Davies, Managing Director, Traiana, said: “This is a further example of NEX Optimisation leading the way in risk mitigation in the FX market. Recent volatile markets and exceptional events have led FX prime brokers to intensify their focus on risk management. By allowing dynamic reallocation, Rebalancer will give these prime brokers further comfort, leading to more credit availability in the market as a whole.”
NEX OPTIMISATION Leading the transformation of market structure, NEX Optimisation offers a portfolio of cloud-hosted services across the transaction lifecycle. Ranging from pre-execution credit checking to multilateral portfolio compression, our purpose is to simplify our clients’ workflow and help them optimise their resources. We are an integrated team of financial markets and pioneering financial technology specialists who operate in all asset classes, geographies and business sectors across the financial markets.
We are dedicated to mitigating risk, increasing efficiency, reducing costs and streamlining increasingly complex processes for our clients. We offer the opportunity to optimise both regulatory and financial resources.
TRAIANA A NEX Group business, Traiana operates within NEX Optimisation which helps clients simplify complexity and optimise resources. We provide the world’s markets with regulatory reporting services that monitor pre-trade risk and automate post-trade processing of financial transactions for listed and over-the-counter trading. Our networks link market participants in high speed-to-market, real-time communication across the trade lifecycle, globally. Services, such as the Harmony Network, have become the market standard for post-trade processing in an increasing number of markets.
TRIOPTIMA A NEX Group business, TriOptima operates within NEX Optimisation which helps clients simplify complexity and optimise resources. For OTC derivatives, our services focus on lowering costs, eliminating operational and credit risk, improving counterparty exposure management and reducing systemic risk. triReduce reduces swap inventory and counterparty risk; triResolve reconciles OTC derivative portfolios, manages disputes, validates repository data, and automates margin management; triBalance manages cleared and bilateral counterparty risk while triCalculate measures and analyses counterparty risk.