Following a review of risk management practices earlier this year, the Futures Industry Association (FIA) has published a paper detailing best practices for automated trading risk controls and system safeguards.
Covering pre-trade controls, exchange-provided volatility control mechanisms (VCMs) and post-trade analysis, along with other tools and controls including market data responsibility and exchange message programmes, the report considers how practices can be applied both to existing and evolving technologies.
On the new report, Walt Lukken, President and CEO of the FIA, commented: “As we reviewed our previous work in connection with the production of this paper, we were pleased to find that, as trading technologies have evolved over time, the risk mitigation tools used by market participants and exchanges continue to keep our markets operating effectively.
“Although the paper builds on more than a decade of work in this area, the practices it outlines are well suited to both existing technologies and evolving ones, such as artificial intelligence.”
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