Limit setting and control
capQORT allows limit setting and control in accordance with regulatory requirements, investment declarations and internal requirements of asset management companies.
capQORT is supplemented with a two-level limit system which provides effective risk management of own and client portfolios. During the first stage the system makes it possible to choose instruments which will be allowed for operations of asset managers and traders. The second stage sets restrictions on trades with these instruments.
capQORT helps to define groups of instruments allowed for operations by the following ways:
- enumeration of instruments in explicit form
- instrument selection by the following criteria:
- instrument types
- issuers and underwriters
- industries (multilevel structure)
- agency ratings (international, sovereign)
- state registration codes, CFI
- inclusion in indexes
- additional features (liquidity, securities for qualified investors, inclusion in quotation lists, inclusion in the Bank of Russia Lombard’s list)
- period before redemption/offer
- fundamental issuer indicators (issuer’s own capital, own pre-tax income, EBIDTA)
- any discretionary classification
- combining different instrument groups in analytical groups by specifying integration or intersection of sets
The following limit types are used to control that portfolio parameters conform to investment declarations:
- limits on portfolio structure
- limits on orders (interval of allowed price deviation from the market one, maximum order volume)
- limits on counterparties
- limits on deviation of a portfolio structure from the model one
- limits on duration (control of average portfolio duration, maximum duration of each bond included in a portfolio)
- limits on DFI position
- lasting limits
Limits may be grouped and applied to portfolios or portfolio groups. Limit violations are recorded in the directory containing reports on breach elimination. Besides that, in case of limit violations alerts are sent by e-mail or via capQORT terminal.
The system allows testing of created limits on existing portfolios before activation.
Not only existing limits but also the external risk system may be used as a control solution.
Modes of limit control
When forwarding orders via capQORT terminal restrictions may be used:
- for Pre-trade control (checks before order forwarding)
In this case the following operation modes are available:
- Informing – in case of limit violations orders are sent to execution brokers. Also, notifications are generated and sent to duly authorized staff of the asset management company
- Requiring a confirmation – in case of limit violations, orders are sent to execution brokers only after they are confirmed by a duly authorized staff member of the asset management company
- Blocking – in case of limit violations, orders cannot be sent
- for Post-trade control
In this case check on limit violations is made after execution of operations. Notifications are generated and sent in case of violations detected during the check. The system keeps records of limit violations and operations causing these violations.
- for End-of-day control
In this case, lasting limits are used making it possible to analyze statistical portfolio deviations from specified parameters over a period of time (for example, a number of days over a period closed with a stock share exceeding a specified parameter in the portfolio).
Active and violated restrictions in portfolios and groups of portfolios are displayed in Portfolio organizer.