Quod Financial, a global provider of adaptive trading technology, today confirms that its underlying platform - Adaptive Execution Platform (AEP) - enables brokers to comply with the new SEC ruling prohibiting "Naked Access".
The AEP powers applications including smart order routing for the buy and sell-side, internalisation of liquidity and online trading.
Today, the SEC confirmed the new rule banning broker-dealers from providing customers unfiltered access to an exchange or alternative trading system (ATS). SEC Chairman Mary Schapiro stated, "The risk management controls and supervisory procedures required by this rule would substantially reduce the chance that erroneous or improper trading activity could disrupt the markets or impact the financial system as a whole."
The unanimous vote reflects that the vast majority of trading is now machine-to-machine far above human capacity and that the potential impact of trading errors have become more severe. "The rule will require broker-dealers with market access to establish risk management controls and supervisory procedures reasonably designed to limit their financial exposure and ensure compliance with regulatory requirements" Mary Schapiro, Chairman SEC."
This new rule states brokers will have to implement, record and maintain a risk management solution to control market access. Quod Financial's multi-asset real-time pre-trade risk function guarantees brokers trade in compliance with the terms of the new SEC ruling. With Quod Financial's pre-trade risk function, brokers can optimise a large number of risk parameters, ranging from limit checking/permissioning to exposure-based calculations. Thereby providing zero latency market access control.
"With the growing complexity of trading requirements, we anticipated evolving regulatory mandates and built the pre-trade risk function from the outset," Ali Pichvai, CEO Quod Financial says. "Quod Financial's pre-trade risk function empowers brokers to execute real-time pre-trade risk and control market access while being both latency sensitive and implement comprehensive risk controls."