Risk Management Tools

Innovative Tools to Manage Risk

Cboe BZX and EDGX Options Exchanges provide free risk management tools available to ALL Members to help them meet their specific risk management needs and mitigate risk, which is critical in the options markets.

These customizable tools enable Members to set critical parameters and prevent unwanted executions including: timeframe of executions, quantity of contracts executed, and notional volume limitations.

Flexible Risk Parameters

Risk profiles can be established for each executing firm ID (MPID), and are defined by parameters set on underlying symbols. These parameters can be set together or independently for each executing firm ID; however, multiple executing firm IDs parameters cannot be grouped into a single risk profile.

The following risk parameters are available:

  • Notional – contracts traded multiplied by the premium (add multiplier for underlying shares associated with the contract)
  • Volume – number of contracts traded
  • Count – number of executions
  • Percentage of Quote – sum across all series in an OSI Root of the percentage of contracts executed versus contracts quoted in each series during a specified time period

Note: Due to corporate actions, multiple underlying options symbols can be assigned to the same equity symbol.

Duration of Parameters

Parameters can be set with minute, second and millisecond increments anywhere from a minimum of 100 milliseconds to a maximum of an entire day. Parameters may also be triggered by an absolute notional, volume or count threshold without regard to a timeframe.

Risk Parameter Activation

Once a risk parameter has been reached, no new trades will be executed and any trades in route will be rejected. Risk parameters are in effect for the Cboe BZX and EDGX Options Exchanges order books, but not for trades in route to other exchanges. Changes cannot be made intraday; however, once parameters are reached, you may continue trading by setting the appropriate BOE or FIX messages.

Mass Cancel

The Mass Cancel feature decreases workflow and saves time when multiple orders need to be canceled. With Mass Cancel, all orders on a specific session that are associated to a specific underlying symbol can be canceled using a single BOE or FIX message.

Self-imposed Order Lockout (“Kill Switch”)

Members may optionally issue, using BOE or FIX, a self-imposed order lockout in conjunction with a Mass Cancel request to help manage all resting orders and prevent new orders.

Please view the Risk Management Specification for further details and contact the Cboe BZX and EDGX Options Exchanges Trade Desk to enable this feature or your Director of Sales with any questions.