1. How can technology make HFT less risky without affecting low latency and high capacity? Vladimir Kurlyandchik Director of business development arqa.ru

2. Perception of risk Common view of HFT risks Technological danger Money risks Price levels & fast losses Trading system capacity & communication lines overload Risk-management = “fat finger” checks

3. arqa.ru HFT’s classic points “We add liquidity and increase efficiency of the market” “We make money using minimal spreads” “We invest a lot of money into technological development”

4. arqa.ru Typical HFT’s strategies 1. Market-making 2. Stat arb

5. arqa.ru Arbitrage & collateral Opposite directions positions with high correlation No big market risk » In practice: separate collateral for each leg BUT

6. arqa.ru Face to HFT Risk- management can improve your business

7. arqa.ru Disbalance nature Risk calculation increases latency! What is better for your client? Understanding the client’s trading pattern Typical view:

8. Pre-trade control Risk Server Trading Venue Client arqa.ru Technology is here

9. Risk Server yes / no Pre-trade Control Module Trading Venue Client arqa.ru Technology is here High latency Low latency »

10. arqa.ru Technology requirements Orders and trades drop copy Market data High speed of data receiving

11. arqa.ru Risk-management techniques 1. Margin trading 2. Portfolio margining (SPAN-like approach) 3. Netting of local shares and ADR/GDR 4. Netting of equity and derivatives positions 5. Unified money account for all markets A. Multi-currency support B. Working orders accounting C. All commissions accounting » »

12. arqa.ru Control accuracy Using real latency for concrete infrastructure Flood control and order volume control to prevent exceeding maximum value P&L checks and checks for allowed instruments

13. arqa.ru Business results Client does more trading Exchange and broker get more commissions Client saves money on funding, reduces cost of operation and complexity of algorithms Efficiency improves » »

14. arqa.ru Different infrastructures – different solutions ModuleDescription Internal latency % from exchange latency on collocation FIX2MICEXFIX-cover for Moscow Exchange stock market (ASTS platform) 60 mcs10% FIX2CETSFIX-cover for Moscow Exchange currency market (ASTS platform) 60 mcs10% FIX2Plaza2FIX-cover for Moscow Exchange derivatives market (SPECTRA platform) 60 mcs7,5% FIX2LSEFIX-cover for LSE stock market (over native API) 25 mcs10% (comparable with LSE fat fingers) MICEXPreTradeSolution which is integrated inside native API of Moscow Exchange (ASTS platform) 3 mcs0,5% FIXPreTradeFIX-proxy for any FIX enviroment30 mcs-

15. arqa.ru Conclusion Don’t fear! Find the balance of interests!

16. Thank You! Questions? arqa.ru