Nasdaq Launches Risk Service

Terry Flanagan

Nasdaq OMX and its Access Services business have launched TradeGuard, an expansion of the enterprise risk management platform formerly known as FTEN. TradeGuard will allow customers to choose from product suite for a range of risk management support, from building a customer risk solution to supplementing a current platform, the company said.

“Since we acquired FTEN, we’ve heard from our clients that their needs for risk management were evolving,” said Stacie Swanstrom, senior vice president of Access Services at Nasdaq OMX. “They were looking for a comprehensive risk management suite for pre- and post-trade that was flexible enough that they could have either a custom product or a scalable solution that would augment their internal system.”

In 2010, Nasdaq OMX acquired FTEN, a pre-trade risk management software provider. “At the time, we saw a need for enterprise risk management solutions with the introduction of the SEC’s Market Access Rules,” said Swanstrom.

Although risk checks like fat finger tests are common to most systems providing market access, the way they go about implementing specific constraints varies, according to Steve Woodyatt, CEO of Object Trading.

“Decoupling order generation from market access and execution infrastructure can give institutions a way forward,” Woodyatt said in a blog posting. “By decoupling, banks and brokers can still support the front ends demanded by clients while leveraging a normalized gateway with standardized risk checks on the back end.”

Nasdaq OMX’s Access Services and Post-Trade Solutions, which Swanstrom heads, provides market connectivity, co-location, risk services, trading applications, compliance, and data management via FinQloud.

“We had an exciting 2013 and look forward to 2014, when we’ll continue to alleviate customers of the financial pressure to do more with less,” she said. “Market participants have latency challenges and risk management challenges and each firm’s business model is unique with so they need to respond differently. With FinQloud, for example, financial services firms are looking to outsource data storage and reduce costs by using our secure cloud computing platform.”

RiskXposure (RX), a risk management engine, will continue to serve as the central backbone of the TradeGuard platform. TradeGuard includes improved gateways and risk monitoring systems. RiskWay is a software-based, trade control gateway for trading equities that allows customer to access multiple markets with latency below 10 microseconds and added risk controls provided by all products within the TradeGuard suite.

Latency reduction from Nasdaq’s old gateway to RiskWay went from about 400 microseconds to 9 microseconds, for a 98% reduction in latency.

“We took the FTEN product suite and started to build on it,” Swanstrom said. “The risk engine, RX, is the backbone of TradeGuard. We view TradeGuard as the overall platform with products that sit within its suite. For example, RiskWay is our new gateway for U.S. equities that does pre-trade risk. It’s less than 10 microseconds and competitively priced. We did a lot to reduce the latency of RiskWay.”

RiskWrapper is a post-trade and front-end tool designed to measure risk at the network level by capturing traffic directly and comparing the trading activity against all network traffic to identify any abnormal activity.

“RiskWrapper is designed to measure risk at the network level by capturing the traffic directly off the network capture device,” Swanstrom said. “Historically, these tools have been used by vendors for latency monitoring. We are working with these vendors to also offer risk management.”

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