Advanced Risk Protection

In response to industry demand for enhanced intraday risk monitoring, Eurex Release 13.0 introduces a new pre-trade risk management service that enables members to define individual risk limits for themselves or their associated trading members (NCMs). These limits are based on real-time post-trade calculations and result in various pre-trade actions thereby avoiding latency impact.

The limits are evaluated against corresponding risk figures being conveyed in real-time via the Enhanced Risk Solution interface and any breach of a set limit can result in the restriction of further trading activity, as pre-defined by the clearing member or their associated trading members (NCMs).

The new measures complement existing risk measures already in place, such as Market Maker Protection and Maximum Order Quantity.

Members can now define configurable risk limits according to different risk metrics, including margin requirements and cash flows. When these limits are breached, pre-defined safety measures will be activated. Clearing members can set limits for themselves or their NCMS. In addition, any exchange member can define its own risk limits for added control.

How Limits are Defined

All members can select from four pre-defined types of limits. However, when both a GCM and an NCM both set limits, the more restrictive limits will hold. Each represents a different aggregate of risk values, described below:

• TMR = Total Margin Requirement
• CULI = Premium Margin + Current Liquidating Margin + Variation Margin + Option Premium
• CASH = Variation Margin + Option Premium
• NDM = Additional Margin + Futures Spread Margin

Available Actions

These new limits encourage members to set risk limits in advance to proactively safeguard trading activities. Members specify which of three actions will be implemented when a breach of each level or risk limits occurs.

Level 1: An alert message is broadcasted to both the NCM and its respective clearing member.

• An additional checkbox is available for members to configure an automatic delete of all open orders and quotes.

Level 2: The system automatically slows down a member's Order/Quote Entry and Order/Quote Modification by enforcing a minimum delay between non-delete transactions in any single product.

• Minimum delays can be configured between 250 and 5,000 milliseconds. Setting the level to zero deactivates the feature.
• An additional checkbox is available for members to configure an automatic delete of all open orders and quotes.
• An additional checkbox is available to restrict order entry to 'Persistent Orders Only'.

Level 3: The member's trading state is set to "halt"

• All open orders and quotes are deleted.
• All trading and clearing functions are prevented.

Inquiries about various limits are permitted, according to the rules below:

• Current risk limits can be inquired via VALUES API.
• Unspecified inquiry will deliver full information on all risk limits where the inquiring member is either maintenance or affected member.
• Inquiry for a specific pair of maintenance & affected member will deliver full information on all risk limits set for this pair.
• Eurex Market Supervision can inquire full information on all risk limits set for a specific affected member.
• Intraday risk limits inquiry can be done via the Enhanced Risk Solution respecting following rules:
• Every member can inquire its own limits.
• A Non-Clearing Member can inquire limits set for it by the clearing member.
• A clearing member can inquire all limits set by it for his Non-Clearing Members.
• A clearing member cannot inquire limits set by Non-Clearing Member for itself.
• Eurex Market Supervision can inquire all limits.

Changing Limits & Timelines for Settings

This risk protection monitoring is based on the same data that is distributed via the Enhanced Risk Solution. This enables members to implement additional risk monitoring metrics that are more complex as well as tailor-made, on same data source.

Members can set risk limits using the Clearing GUI provided by Eurex. When members use the GUI to enter and/or change risk limits, the new limits become valid as of the next business day. Changes to other parameters (delay; Order/Quote Delete) are effective immediately.

Only Enhanced Risk Solution users can make intraday changes to their risk limits. Changes initiated via the Enhanced Risk Solution are effective only for the current day and will be overwritten with limits defined in the Eurex Clearing GUI being valid as of the next business day. If this override is not desired, the respective limit change must also be done via the GUI.

In combination with the real-time risk monitoring service provided by the Clearing House's Enhanced Risk Solution, our members now benefit from an even broader set of risk management tools.

Report Changes

The following reports have been modified to reflect these changes:

• TT130 RISK EVENT REPORT
• TT131 RISK EVENT TRADER REPORT

More details on report changes are available in the Release notes which can be found in the Eurex Member Section, a closed user group section on the Eurex website.

RAL Changes

A new RAL 'Risk Limit Add/Change/Delete' has been added. The RAL ID is 67.