Brokers who choose to warehouse some risk need to continually assess which trades they want to take onto their books. The ability to do this effectively will have a massive impact on broker profitability. Too often brokers identify clients whom they realise they should be STP’ing retrospectively after they have taken significant losses on warehousing their risk. While Tapaas components like the Risk Cube and Risk Alerting provide very effective tools to mitigate risk in real-time, it is clearly better practice to analyse client trading behaviour and manage client book assignments proactively.

Tapaas accumulates a comprehensive time series database of trades and quotes that can be used to analyse client trading behaviour and predict those future trades that are better to STP rather than warehouse. Generally such toxicity business rules are a broker’s secret sauce which they will perfect over time and guard jealously. The Tapaas Client Trading Toxicity Framework provides a powerful backtesting framework integrated with the Tapaas time series database of the brokers trades and quotes, which allows brokers to identify, refine and validate various toxicity strategies.

Managing risk effectively starts with instantaneously seeing all of your client and proprietary positions and their associated risk aggregated across all of your trading servers. The Tapaas Risk Cube provides this data in real-time through a state-of-the-art streaming OLAP cube that enables the broker to pivot their view of risk through the full range of dimensions such as client, symbol or book, drill down to identify the key sources of risk and then effortlessly take actions to mitigate that risk.

Along with those capabilities, Tapaas can manage the real-time migration of clients between books and dealing with resultant hedge position impacts by either presenting dealers with aggregated net hedge imbalances or automatically placing necessary net hedge trades to eliminate exposure.

And because risk management shouldn’t rely on a dealer to spot potential risk, a comprehensive set of alerts are available that alert when client or symbol P&L or exposure breach user-defined levels. These alerts can be even be set to take automated remedial action by shifting clients between books and placing the necessary hedges.

How do you know that the trading positions you are looking at are correct? When do you find out about out trades? When do you discover that the MT4 plugins that you are using have issues that cause you to lose money?

The key to solving these issues lies in real-time reconciliation of trades. The trades that come from your liquidity provider must match the price maker trades notified by your bridge. And the price taker trades notified by your bridge should match the trades appearing in your MT4 systems. Tapaas provides a real-time reconciliation engine that performs this analysis and alerts immediately a break is detected so you can take action to mitigate any risk. It lets you stay on top of any issues before you lose money or before a client complains.

In addition to analysing pricing that has been aggregated, brokers who have access to feeds upstream from their aggregator, can benefit from analysing individual liquidity sources.

A rather naive approach to order routing is to simply send ones order to the liquidity provider at the top of the book.  However, the provider with the best price might frequently reject orders with even slight movements in the market while others honour their quotes more reliably.  To achieve the best quality execution, a broker needs a means to use a less naive order routing algorithm.

Tapaas Liquidity Provider Analysis can be used to make longer term strategic decisions about how you use your liquidity providers.  They can also be used in real-time to inform a more sophisticated order routing algorithm to achieve reliable best execution.

Brokers win business by offering quality pricing and excellent execution.  To do so requires the broker has well managed state of the art technology.  But it also depends directly on the quality of pricing and execution the broker receives from their Liquidity Provider(s).

Though we all know the Liquidity Providers have the best of intentions, they do need to be held to account for quality issues.

Identification of issues in the quality or pricing or execution can be done in a labour intensive way by sifting through transaction logs and manually comparing timestamps.  This is typically done after customers have complained about high rejection rates or missed opportunities.

With Tapaas Liquidity Spread Analysis, brokers can discover issues with the incoming price streams in real-time.  They can also be alerted to issues detected.