Pre-Trade Risk Management (PRM)
Control Your Risk from Entry to Execution
Nasdaq Pre-Trade Risk Management (PRM) – available for The Nasdaq Stock Market, Nasdaq BX and Nasdaq 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.
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.
- 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.
- 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
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
Sponsored Access Brokers can use PRM to manage the limits of your sponsored participants. Retail Brokers can prevent erroneous trades that result from manual entry of order prices. Agency Desks can closely manage orders, prices and sizes entering the Nasdaq Exchange.