Risk management is a constant topic for brokers, as there is always a need to monitor and resolve new, existing, and mutating risks to maintain a stable trading environment.
Risk management allows brokerages to:
- Enhance operational resilience
- Ensure regulatory compliance
- Protect its capital
- Build trust with traders
As overwhelming as it all may sound at first, advanced and reliable risk management does not need to be overly complex or frustrating.
In fact, here at TFB, we are strong believers in simplifying workflows and keeping things straightforward for our brokers and their clients.
Why?
Because where there’s complexity, there is room for errors. The fewer steps that are required, the less likely brokers are to miss, forget, or confuse something.
To live the simplicity principles that we preach, we continually work on adding new tools and solutions to the TFB product ecosystem, whether directly to the Trade Processor liquidity bridge or as fully compatible plugins or applications.
That brings us to the latest addition to the risk management solutions family – the B-book Exposure Limiter LP.
What does the B-book Exposure Limiter LP do?
The B-book Exposure Limiter LP is a solution that limits broker risks and protects them from uncontrolled exposure.
Brokers can set certain limits on their risks (on B-book) for each instrument. When the exposure exceeds the predefined threshold, the volume above the threshold is transferred to A-book, meaning the risks are hedged.
For larger brokers with high volumes, this solution works almost like an SL on a more global level. Traders can limit their risks on a position level by setting up limits, and brokers can do the same, but on an instrument level.
Let’s examine the following example to better understand its functionality.
Let’s say we have a bucket that’s filled until a certain limit, for example, up to 50 litres out of 100. Once the bucket is completely full, the leftovers overflow to an A-book liquidity provider. Here, the broker is only putting 50 litres of “risks” in the bucket.
Risk management tools built into the Trade Processor liquidity bridge
The key to successful risk management lies in two core pillars:
- Updating your risk policy every 6-12 months.
- Utilising multiple tools to prevent different types of risks.
We can’t force you to follow the first principle, but we are more than happy to assist you with a multitude of risk management tools. And the best part – they’re all available to you through a single liquidity bridge solution, meaning you don’t have to install, test for cross-compatibility, or learn how to operate multiple solutions from different vendors.
- A/B Switch: Set up an automated switch between A- and B-book to minimise risks and protect funds.
- Smart Aggregation: There is more than one way to execute an order, and the option to choose between six different aggregation modes helps find the best pricing and minimises risks for any type of order.
- Volume Consolidation: Automatically consolidate open positions across your LP to minimise exposure and cut costs on swaps.
- Execution Profiles: Customise execution profiles based on markups, spreads, routing, and timing to adapt to different client groups and market situations.
- Backup LP: Switch to a backup liquidity provider instantly if the primary liquidity is unresponsive for any reason.
- Real-time Monitoring: Proactivity is always better when it comes to risk management. Detect any abnormalities as soon as they happen and make the most of the situation. Use built-in reports to identify trends and co-dependencies, and change your risk policy and business strategies accordingly.
- Seamless Compliance Reports’ Integration: Integrations with TRAction and MAP FinTech pave the way for simpler compliance and minimises regulatory risks.
