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ASIC Calls for Improved Risk Practices by Retail OTC Derivatives Brokers

Retail OTC Derivatives Risk Management

The Australian Securities and Investments Commission (ASIC) recently conducted a review of 57 retail derivative issuers to gauge the size of the industry, the products offered and the risks posed to investors.  As a result of the study, they published a report titled REP 579: Improving practices in the retail OTC derivatives sector. The report provides an overview of the market and highlights several practices of Retail Brokers or issuers, in which they want to see improvement.

In this report, the commission warns OTC derivatives issuers about:

  • misleading marketing materials;
  • unclear pricing methods;
  • inadequate risk management;
  • inadequate monitoring of counter-parties; and
  • inappropriate referral arrangements.

ASIC promises to continue to take action to address these risks by raising industry standards and improving issuer’s compliance. This affects every ASIC regulated broker.

Inadequate Risk Practices

The ASIC report did not list all the risk practices deemed inadequate.  But, in the electronic trading environment of an OTC Derivatives Broker where prices are volatile and large volumes are traded in fractions of a second, any solution involving copy and paste to Excel is surely inadequate.  This is particularly true as a broker attempts to scale their business adding additional trading platform servers.

How can Tapaas Help?

Tapaas is a real-time Risk Management and Data Analytics platform which is integrated directly with the brokers trading platform.  As such, it continuously computes risk and presents it visually so it can be rapidly understood by the broker’s risk team.  Further, our Risk Alerts Engine monitors trading activity, risk and exposure continually evaluating broker policy settings and raising alerts in event of breach.

The solution achieves the following:

  • facilitates rapid understanding of the composition of risk in the context of policy;
  • alerts appropriate individuals to any breaches or situations which require immediate evaluation and action; and
  • provides a facility where Dealers and Risk Managers can take immediate remedial action like hedging and book switching.

Why Tapaas Risk Management Solution?

We’ve designed Tapaas specifically for Retail OTC Derivatives Brokers to address the challenge of managing risk in a the high velocity world of electronic trading.  It easily handles very large volumes of data and rapid price changes that cause large changes in exposure in an instant.  The Tapaas dashboards present data intuitively for rapid understanding.  They also allow the user to explore the data to discover facts which are not obvious from simply viewing static tables of data.

To learn more about how Tapaas can assist you with your risk management strategies.


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