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IEX Announces: Aggregate Risk Controls for Gross Notional Exposure

IEX Trading Alert #2014 - 015

Please Route To: Business, Clearing, Technology, Trading, and Trade Support

What you need to know:

  • IEX introduces support for Aggregate Risk Controls (ARC), the first of which is Gross Notional Exposure:
    • Functionality which automatically ceases trading for a broker session once the cumulative notional value of executions exceeds a pre-determined threshold.
  • Target launch date: Wednesday, July 9th.
  • How ARCs work:
    • IEX ARC can be configured to accumulate for a broker correspondent across MPIDs, by MPID, by FIX session, or in combination, per Clearing Firm relationship.
    • Clearing Firms set the upper bounds of any limits used.
    • Clearing Firms should consult IEX Market Operations at 646.568.2330 to opt-in and customize Gross Notional Exposure threshold for clearing correspondents.

What is the Aggregate Risk Control for Gross Notional Exposure?

IEX ARC for Gross Notional Exposure (GNE) accumulates the notional value of trading for a clearing firm’s broker correspondent and will automatically reject new orders and cancel all open orders when GNE has exceeded a pre-determined limit.

GNE is calculated as the absolute sum of the notional value of all buy and sell trades: equal to executed buys plus absolute value of long sells plus absolute value of short sells. There is no netting of buys and long sales in the same symbol or across symbols. GNE resets for each new trading day.

ARC may be used as a "kill switch" which, upon request of the Clearing Firm or Broker Subscriber, IEX Market Operations will disable the broker session and cancel any open orders.

IEX will notify the Clearing Firm and Broker Subscriber once:

  • 70% of the GNE is met.
  • GNE is exceeded.

Why did IEX build an Aggregate Risk Control?

ARC was created to provide Clearing Firms and Broker Subscribers an additional level of risk management, and to complement per order risk limits currently enforced at IEX.

What do I need to do?

Do nothing if you are not interested in utilizing the ARC for GNE. However, your Clearing Firm may request it on your behalf.

If you are interested in utilizing ARC, contact IEX Market Operations with your Clearing Firm to configure the necessary limits. Clearing Firms and Broker Subscribers who are configured for ARC can modify Gross Notional Exposure risk limits for any broker session by contacting IEX Market Ops at 646.568.2330.

Where can I learn more?

About IEX

Dedicated to institutionalizing fairness in the markets, IEX provides a more balanced marketplace via simplified market structure design and cutting-edge technology. IEX operates a fair-access platform accessible by any qualified broker dealer. IEX is driven by a team of cross-industry experts with backgrounds spanning market venues, electronic trading, and broker-dealers. IEX is the first equity trading venue seeded exclusively by a consortium of buy-side investors, including mutual funds, hedge funds, and family offices. Learn more at: iextrading.com.