The world's leading foreign exchange dealers and trading platforms are collaborating on an industry-wide initiative to reduce the risk of an algorithmic-led 'flash crash' hitting the global currency markets.
Icap subsidiary Traiana is partnering with four top prime brokers and five trading platforms to launch a real-time risk monitoring service, dubbed Harmony CreditLink.
The system offers prime brokers the ability to to monitor their clients' credit risk across multiple ECNs on a real-time basis, act on exceptions in a single integrated dashboard, and open, change or close credit lines to manage risk. The system alerts dealers to limit breaches and allows the prime broker to modify credit lines or terminate trading activity with an integrated 'KillSwitch' capability.
The system has been developed in response to a surge in high-frequency and algorithmic FX trading by hedge funds, raising the spectre of a volatile 'flash crash' and systemic collapses hitting the currency markets.
Andrew Coyne, head of FX Prime & G10 eCommerce, Citi, says: "This collaborative industry initiative addresses a fundamental and immediate industry need - that of providing trading and limit management to prime brokers to enable them to monitor their clients' credit risk in real-time. Initiated independently of any regulatory call for change, this new solution will fundamentally change the way the FX industry operates going forward."