Unified cash position module for spot and derivatives markets

The module enables control over a client’s unified cash position on securities and derivatives markets and obviates a broker’s need for funds redistribution between the markets.

The module integrates the client’s cash positions on the underlying asset market (spot market) and the derivatives market (futures and options). The client employs one unified cash position for operations on the stock market and collateral calculation for the derivatives market taking account of working orders. The approach is based on the SPAN-model which was adapted to Russian realities.

The use of the Unified cash position module significantly simplifies arbitrage operations and allows their automatic execution as it does not require the broker’s participation in limit redistribution between different markets.
This module allows brokers to:

  • set risk management algorithm for end users in accordance with rules that may differ from the risk control rules of a particular exchange (for example, for client position keeping at operation execution on the Moscow Exchange Derivatives Market),
  • provide clients with the unified cash position service between spot- and derivative markets,
  • provide a full range of client services at international derivatives venues.

Module Functions

The main component of the Unified cash position module is a system of portfolio collateral calculation which allows:

  • combining for calculation purposes a future option, a spot asset option, a future and the spot-asset itself into a unified instrument portfolio and compensating for their risks;
  • setting collateral for positions with compensatory risks for instruments with different execution terms;
  • setting collateral for positions with compensatory risks for different instrument types;
  • regulating the level of portfolio risks and liquidity required to pay  futures variation margin;
  • integrating risk management and the margin lending system on the spot market;
  • estimating funds required for order execution.
The main idea of combining portfolio collateral calculation and margin control on the spot market is that the 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 freezed on the client’s broker account and become not available for other operations.

The evaluation of portfolio collateral risks and funds freezing takes place after any change in the client’s position. As the portfolio may include spot assets, the funds are freezed after a change in a spot position as well.

The main principles of order accounting are as follows:

  • the portfolio collateral calculation takes into account the worst possible order execution scenario;
  • a position closing order is always available.

To meet both conditions it is necessary to keep separate records of orders and portfolio risk management system, i.e. client’s funds are separately allocated for portfolio risks and for order execution.

Following the order execution, portfolio collateral risks for the changed position and funds allocated for working orders are estimated again. The proposed system for resources allocation guarantees that funding reserved for orders will be sufficient to cover risks of the position resulted from execution of previous orders.

Hardware and Software Requirements

Hardware Software

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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