Risk Controls Summary

Risk controls implemented in CFE include Pre-Order and Post-Execution Risk Limits, Kill Switch functionality and the ability for TPHs to impose lockouts through order entry protocols (FIX and BOE). The following summarizes the various CFE risk control types:

Pre-Order Risk Limits - Pre-Order risk limits are evaluated before an order/quote is accepted into the trading system. If an order/quote violates a Pre-Order risk limit, the offending order /quote will be rejected. After the rejection of an order/quote on account of a Pre-Order risk limit, the TPH is free to continue submitting orders/quotes. In other words, Pre-Order risk limits are applied on an order-by-order basis.

Post-Execution Risk Limits - Post-Execution risk limits are evaluated after an execution occurs. If an execution causes a Post-Execution risk limit to be exceeded, all open orders/quotes placed by the TPH using the same Executing Firm ID (EFID) in the associated product (e.g., VX) are cancelled across all FIX/BOE sessions and new orders/quotes in the associated product are rejected across all FIX/BOE sessions until the risk condition is reset (see Protocol Level Risk Reset).

Kill Switch - Kill Switch functionality is exposed through the Customer Web Portal that allows TPHs and Clearing Firms to cancel all open orders/quotes and reject new orders/quotes by EFID across all products and all FIX/BOE sessions. Only the TPH or Clearing Firm that activated a Kill Switch (or the CFE Trade Desk) can reset it through the Customer Web Portal.

Self-Imposed Lockouts - When issuing Mass Cancel or Purge Request operations through FIX/BOE sessions, TPHs can specify a self-imposed Firm, Product or Custom Group ID Level Lockout, which causes new orders/quotes across all FIX/BOE sessions to be rejected until the Lockout is reset (see Protocol Level Risk Reset).