Unified cash position module for spot and derivative markets

The module enables control over the client’s unified cash position on the stock and derivatives markets and makes the redistribution of funds between the markets by the broker unnecessary.

The module enables the client cash position on the basic asset market (spot market) and the derivatives market to be unified. The client is assigned a common position for all funds to make operations on the stock market and estimate the collateral value on the derivatives market including active orders. SPAN-model was used as the basis and was adapted to the Russian realities.

The use of the unified cash position module makes arbitration operations much simpler and allows performance in the automatic mode, because there is no need for intervention of the broker in the process of limit redistribution between different markets.

This Module allows brokers to:

  • set risk management algorithm for end users in accordance with rules that may not be fully compatible with risk control procedures of a specific exchange,
  • provide clients with the unified cash position service between spot- and derivative markets,
  • provide a full range of client services at international derivative venues.

Module Functions

The main component of the unified cash position module is collateral calculation that enables:

  • for calculation purposes to combine a future option, a spot asset option, a future and a spot-asset itself into a unified instrument portfolio and to compensate risks on them;
  • to set collateral for positions with compensating risks by instruments with different execution terms;
  • to set collateral for positions with compensating risks by different instrument types;
  • to regulate ratio of portfolio risk levels and liquidity needed to pay for variation margin by futures;
  • to combine risk management and the margin lending system on the spot market;
  • to take into account funds needed for order execution.
The main idea of combining portfolio collateral calculation and margin control on the spot market is that risks calculated for portfolio collateral must be secured with the client’s net assets (funds available for withdrawal or purchase of non-margin securities). These funds are blocked on the client’s broker account and become unavailable for operations.

Portfolio collateral risk evaluation and funds blocking is made after each change in the client’s position. As a portfolio may include spot assets, blocking is also made after a change in a spot position.

The main principles of the order accounting are as follows:

  • in the portfolio collateral the worst variant of order execution is taken into account;
  • order forwarding on closure of any position is available in any case.

To fulfil both conditions it became necessary to keep self-contained records on orders and portfolio risk management system, i.e. client’s funds are reserved separately for portfolio risks and for order execution.

When an order is executed, portfolio collateral risks of a resulting position and funds blocked for active order execution are revaluated. The proposed system for blocking resources guarantees that the funds reserved for the order will be sufficient to cover risks of the position resulting from the order execution.

Hardware and software requirements

Hardware Product name

The module is installed on the same computer with the QUIK server.

Use options

Purchase Managed services / System backup Hosting Testing
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