RMS

The Market Making component in RMS allows two kinds of hedging: cross-market hedging and hedge checking for automatic quotation.

Market makers use RMS to create orders, respond to quote requests and execute trades based on custom defined rules. They can also set the values to trigger trades, create automatic bids and asks, and perform hedging calculations.

When generating automatic calls and puts for options, RMS considers volatilities, dividends and Risk Free Rates. You can choose to take these values from the IRESS options module or to define them in RMS.

Trade protection

Market makers safeguard against unwanted trading by defining trade protection rules, such as:

• automatic quote, request and auto-removal of untraded bids and offers
• automatic step back or step out based on a specific bid/ask spread for the underlying stock or a pre-determined number of fully traded orders
• re-entry limits, such as the variation in new bid or ask values and the current bid or ask, or if more than 60 minutes has elapsed since the last order was sent.

Features

• Real-time automatic quoting. This supports cross-market hedging, such as using ASX trades to hedge ETOs.
• Automatic trading. RMS monitors the market for orders that match specific valuation criteria and executes a trade when it locates an eligible order.
• Records custom price changes for the underlying stock that will generate orders for the securities in the group.
• Automatic quote requests.
• Automatic or manual quote request response. Rules define the time frame for generating these and how long they remain in the market.
• Hedge checking for automatic quotation.
• Live hedge checking and automatic notification of this activity.
• Trader alert function for efficient market making in many stocks simultaneously. Automatic notifications can display for:
  • bids and asks that have been placed
  • trades in specific securities
  • personal trades
  • hedging activity.

RMS

The Risk Management component in RMS offers comprehensive position and risk management tools. It provides real-time portfolio valuation, and displays the profit and loss based on underlying share values, and Gamma and Delta values (hedge position).

Risk management is performed via a risk matrix based on the price of the underlying stock, volatility and Risk Free Rate. You can view your exposure as values or in a chart.

Features

• Links with IOS trading accounts, and updates holdings as trades occur.
• Displays summary information for the underlying stock value and detailed data for derivatives positions in a single window.
• Calculates Profit and Loss, the change in underlying share values or the ß profit movement from the risk matrix. For example, a matrix with the price of the underlying stock on the X axis and the volatility on the Y axis, can display profit and loss based on these values in the body of the matrix. Matrix output can also be displayed as a chart.
• Ability to create a sub-matrix of values that require closer monitoring.
• Ability to create a risk matrix based on the price of the underlying stock, volatility and RFR values. Changes in values can display as either percentages or units.
• Uses either default option scenario values from IRESS or custom scenario values created in IRESS or RMS. Scenarios are based on single securities and it is easy to toggle between custom and system scenarios.
• Indicates when profit margins are achieved.
• Compares the value of a holding with the values of other derivatives from the same underlying stock.
• Values current holdings historically.