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FIA publishes order handling Risk Management recommendations for Executing Brokers

FIA publishes order handling Risk Management recommendations for Executing Brokers

16 March 2012 12:00am EDT
Building on recent FIA publications, including Market Access Risk Management Recommendations (April 2010) and Recommendations for Risk Controls for Trading Firms (November 2010), this document offers a number of recommendations for executing firms to consider both in designing policies for their own brokers that handle orders electronically and in dealing with customers that access the markets through a broker’s trading platform.
 
Electronic orders are by nature low touch. This document is intended to outline best practices for orders that are routed through a trading platform that the broker fully administers
including 1) a FIX connection from a client’s proprietary trading system, 2) a FIX connection from a third-party Order Management System (“OMS”) or Execution Management System
(“EMS”) or 3) a single dealer platform that is either internally developed by the broker or provided to the broker by a third-party software vendor.
 
This document is not intended to cover broker-provided direct access to an exchange; for best practices for this type of order flow please refer to FIA Market Access Risk Management
Recommendations.
 
The situation of inadvertent wash trades generated through electronic trading has been omitted from this document since FIA feels that this issue needs to be discussed separately.
Several items within this document—particularly recommendations regarding executing broker automated execution tools—are not currently common practice within the futures
industry but are becoming increasing typical for equities trading, and may be considered equally applicable for all electronically traded asset classes.
 

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Order_Handling_for_Executing_Brokers.pdf (238.93 KB)

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