TTC First to Offer Real-Time Margin Calculations for Eurex Clearing Prisma

Eurex Clearing is set to mothball its current Risk-Based Margining (RBM) system by the end of the year and replace it with a more powerful and demanding portfolio-based margin system named Prisma, a platform that TTC's Janus Risk Management suite can interface with, supporting clients' real-time market and clearing risk management activities. 

Janus technology processes exchange margin parameters via a complex-event processing (CEP) engine, which then generates outputs based on user-defined rules, and is therefore a very low-latency, high-performance environment.

As end-of-day or snapshot Value at Risk (VAR)-type calculations provide limited visibility of potential risk, basic back-office systems won't be able to cater for Eurex's frequent intra-day adjusted parameters. Janus' real-time calculations ensure that the right risk measure is applied to the latest portfolio and open-order derived positions, taking into account the exchange's view of all market activity.

"Most people assess their risk profile from a snapshot of their end-of-day position rather than looking at what is happening in the marketplace right now or what is happening to a particular client in terms of new orders and new trades," explains Alex Lamb, head of Americas at TTC. "The volume of data we have to consume and use in order to assess the margin for the open position is very challenging ─ we are the only ones able to do this in real time as of today."

Enhanced Risk Assessment
The clearing house recommends that members start migrating as soon as possible to Prisma to ensure a more secure transition between the two systems.

Clients' usage is improved as the margin calculator continuously reports the progress of calculations using a status window, and warns on connectivity losses through a heartbeat mechanism.

Eurex Clearing Prisma will support exchange-traded fund (ETF) derivatives, improve handling of the Euro-Swap Future expirations, and adjust long-option credit calculations. It is also set to provide an additional set of transparency enabler (TE) files at the start of the day in order to enable clearing members to replicate Prisma on an intra-day basis with the most up-to-date risk and product parameters.

The margin calculator will also be enhanced by an additional input format to represent the interest-rate sensitivities of a specific portfolio that considerably increases the performance of margin calculations. Clients' usage is improved as the margin calculator continuously reports the progress of calculations using a status window, and warns on connectivity losses through a heartbeat mechanism.

As well as providing real-time margin calculations required by Prisma, the Janus suite can also generates real-time alerts to flag-up any suspicious activity occuring on the network.

"Because our product is trading-platform agnostic, even firms with a variety of trading systems can capture all the activity coming from their trading systems because we can simply pick up the FIX message flow without interfering with the speed at which orders go to the market," adds Lamb. "It can also generates alerts in sub-millisecond time so for example, a simple portfolio may be recalculated in as little as thirty microseconds in our system. We provide timely alerts that can then produce not just a message but also generate an activity such as killing an order to stop a Knight Capital type of incident."