Pre-Trade Risk Management (PRM)

Control Your Risk from Entry to Execution

Overview

NASDAQ OMX Pre-Trade Risk Management (PRM) – available for The NASDAQ Stock Market, NASDAQ OMX BX and NASDAQ OMX PSX – provides member firms with the ability to set a wide range of parameters for orders to facilitate pre-trade protection for FIX/Rash and OUCH/Flite ports. Using PRM, firms can put controls on their trading activity and the trading activity of their clients and customers at the order level — including the opportunity to prevent potentially erroneous transactions.

Benefits and Features

Validation Ahead of the Match

PRM validates orders entered on PRM-enabled ports prior to allowing those orders into its matching engine. PRM uses client-set parameters to determine if the order should be sent for fulfillment. If rejected, customers are provided with clearly defined reject reasons.

PRM has several great benefits:

  • Speed. PRM is fast — adding virtually no latency to order acknowledgement time.
  • Accuracy. PRM functionality reads real-time Level 2 price information from the UTP and CTA Security Information Processors (SIPs) at the port level to ensure the most accurate information available for validating orders.
  • Flexibility. PRM is flexible enough to manage everything from price protection on retail or agency orders to full control of sponsored access relationships.

PRM Components

  • PRM-enabled Port – Any FIX, RASH or OUCH port can be upgraded to a “PRM Port,” meaning all order flow sent over that port can be checked for limits, order types, etc. prior to being sent onto the matching engine.
  • PRM Module – A module may include any combination of available checks: Fat Finger (FIX/Rash only), Order Checks and/or Aggregate Totals per market.
    • For FIX or RASH a module may be defined by:
      • MPID + PRM-enabled port
      • MPID + account
    • For OUCH a module may be defined by:
      • MPID + PRM-enabled port
        • MPID + User
    • PRM Viewer – An add-on to the NASDAQ Workstation allowing a managing firm to view and manage risk control settings, view real-time limit totals and reject messages.
    • Execution and Order DROP Copies

    PRM Protection

    Fat Finger Checks allow you to set a percentage away from the National Best Bid or Offer (NBBO) that you’re willing to execute to fill your order. If the order would have to exceed the set percentage to execute in full, the order will be rejected before it can execute. Firms can set order limits at several levels to ensure that clearly erroneous orders never execute.

    Order Checks provide users the ability to check orders against an array of manageable limits. Users can decide whether to allow trading in the pre- and post-market sessions, specify which order types, if any, are prohibited and manage symbol lists — including restricted stock lists — by allowing or disallowing orders on a per-security basis.

    Aggregate Total Checks allow users to set limits for:

    • Daily shares and/or total value
    • Buy, sell or on a gross and/or net basis
    • Executed trades, open orders or both to summarize total risk
    • Settings available globally and on a per-security basis on each module

    Front End Limit and Total Management

    Summary NASDAQ Tab Setting Aggregates Order Checks Fat Finger Checks
    Summary NASDAQ
    Tab    		 Setting
    Aggregates    		 Order
    Checks    		 Fat Finger
    Checks

     


    Using our intuitive PRM Risk Manager front end, users can manage limits and review totals.

    Other key functions include:

    • Monitor all modules in one consolidated view. The PRM Risk Manager gives you the ability to see if anyone is approaching limits at a glance.
    • "Big Red Button" - Manually disable/re-enable a module
    • Manage Easy-to-Borrow and Restricted Stock Lists
    • See reject messages
    • Access Tradeinfo to manage orders and executions in real time.

    Upcoming Enhancements!

    • Email alerts for limit breaches and rejects
    • Consolidated limit and total screens
    • FTP for ETB and Restricted lists

    Supported Protocols and Specifications

    Visit our specifications page for the latest versions for each protocol.

    Who Can Participate

    Adding virtually no latency to order acknowledgement time, Broker/Dealers and Market Makers will find NASDAQ's PRM valuable for virtually any business line or function in which they engage. Other typical users include:

    • Sponsored Access Brokers. Use PRM to manage the limits of your sponsored participants.
    • Retail Brokers. Fat Finger Controls help prevent erroneous trades that can result from manual entry of order prices.
    • Agency Desks. PRM closely manages orders, prices and sizes entering the NASDAQ Exchange.

    How to Subscribe

    Market participants can subscribe to PRM by completing the PRM Order Form. Please fax the form to NASDAQ OMX Subscriber Services at +1 212 231 5426.

    For any further information or questions, please contact Transaction Services U.S. Market Sales at +1 800 846 0477.

Pricing

Agreements & Forms

Related Products & Services

Contact Information