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SR Labs Unveils Risk Tool for Brokers to Control Sponsored Access to Buy-Side

Brokers can set position limits on hedge funds that work across multiple exchanges and ECNs.

With the current focus on risk management, SR Labs is releasing a new product, called Risk Tool, targeted at brokers that offer sponsored direct-market access to buy-side clients.

With hedge funds and other buy-side firms trading in the broker’s name, the new product, known as Risk Tool can be used to manage position risk, essentially for sponsored-access, according to Samir Islam, director of software development at SR Labs in New York.

“As you trade through the system it keeps a complete account of open positions, what’s executed, what’s canceled,” explains Islam. While this is not a risk calculation tool, it allows the sell-side set up limits on the total share value or notional value on a stock name basis or global basis.

The product is targeted at sell-side customers that offer sponsored access. Islam says demand for the product is coming from brokers with hedge fund clients who have various lines to European MTFs (MultilateralTrading Facilities). Also, brokers offer lines to U.S. exchanges or ECNs and allow hedge funds or buy-side access to that, he says. The broker has complete control over what the client is executing, including position limits, order types, short-sale names and restrictions based on any arbitrage rule, he says. “There’s a great amount of risk if you are not keeping track of where they’re routing, what their positions are and what your exposure is,” says Islam.

As a high-speed software developer of financial trading systems, SR Labs has designed Risk Tool to monitor positions in sub-millisecond latency, “which is the hallmark of the company,” says Islam. “This is another product that lets people deliver risk management without adding any delays to the system,” he contends. “The client doesn’t want to see any additional latency on their order. It should be as minimal as possible,” he adds.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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