Manage Your U.S. Equities Risk on Your Own Terms

Adam Inzirillo
July 8, 2020

Cboe’s robust equities risk management tools are designed to help you and your firm manage execution risk with ease. The new functionality offers three interrelated, complementary enhancements that together provide powerful and flexible risk management solutions at varying levels of granularity.

MPID Level Risk Controls

Members (or clearing firms acting on your behalf) can manage risk at the MPID level through Gross and/or Net Notional Risk Thresholds by receiving notifications when approaching designated thresholds. Members can also authorize the Exchange to automatically block new orders submitted and cancel open orders that breach those set thresholds.

Equity Purge Ports

Members can cancel all open orders — or just a subset of open orders — across MPID(s), Symbol(s), or RiskGroupID(s), across multiple logical ports and sessions.

Strategy Level Risk Controls

Manage risk at a more granular order-by-order level by applying RiskGroupIDs to individual orders submitted. Members can create and define ‘RiskGroupID Risk Profiles’ around those order subsets to include Gross or Net Notional Risk Thresholds per subset. All new orders subsequently tagged with a specific RiskGroupID will then be subject to the specified profile.

Using Tools in Tandem

When Equity Purge Ports and Strategy Level Risk Controls are used together and orders are assigned to user-specified order groups, Members gain the ability to effectively manage exposure across individual desks, strategies and risk profiles.

Entering RiskGroupIDs at the individual order level enables Members with two layers of risk management: 1) order-by-order maximum risk thresholds defined through risk profiles, and 2) the ability to manually mass-cancel open orders per RiskGroupID using purge functionality if certain thresholds are breached (e.g. 70% or 90% of your maximum limit). Whether orders are grouped by symbol, price, customer or trading strategy, deploying these tools together provides you with flexibility, control, and of course, peace of mind.

These new capabilities, alongside Cboe’s existing risk tools, are crucial to managing your U.S. equities risk on your own terms across a wide range of different scenarios. Learn more about these enhancements and our entire suite of U.S. Equities Risk Management tools here and find even greater detail in the FAQ.

The information in this blog post is provided for general education and information purposes only. No statements within this blog post should be construed as a recommendation to buy or sell a security [or futures contract, as applicable] or to provide investment advice. Supporting documentation for any claims, comparisons, statistics or other technical data in this blog post is available by contacting Cboe Global Markets at Past Performance is not indicative of future results. Cboe, is a registered trademark of Cboe Exchange, Inc.  

© 2020 Cboe Exchange, Inc. All Rights Reserved.