Risk Limits

Risk Limits

Order Cross Prevention and Position Transfer

The TT system provides risk administrators with the ability to enable Avoid Orders That Cross (AOTC) functionality and select different AOTC rules per account to prevent order crossing at the exchange.

Order cross prevention rules

When creating an account, you can select the following order cross prevention rules per account to prevent order crossing at the exchange:

  • Not Applied — No order cross prevention rule is applied to the account.
  • Reject New — Reject a new order that could potentially fill resting orders in the same account or account tree. Applies to only Limit orders and native Iceberg orders.
  • Cancel Resting (wait for ACK) — Send a cancel request to the exchange for the resting order. When the exchange acknowledges the request and cancels the order, submit the new order. Applies to only Limit orders and native Iceberg orders.
  • Position Transfer — When a match is detected, the resting order is canceled or the working order quantity is reduced by the size of the aggressive order. A fill is created by TT and sent to each account. If the aggressive order was larger than the resting order, then the remainder of it will be sent to market. For a description of how Position Transfer works, refer to Position Transfer.

  • Position Transfer (if resting order is best bid/offer) — This rule works the same as Position Transfer except that the internal matching occurs only if an order has the potential to fill a resting order at the current best bid/ask price.

    Note: When using this rule, the resting order may get matched and filled at the exchange while the aggressive order is in flight.

At the account-level, you can configure the default behavior for orders that cross within an account and between accounts within your company.

Order Cross Prevention is set for the parent account and inherited by any sub-accounts (child accounts) associated with the parent account. When a parent account is shared with another company, the sharing company can determine which Order Cross Prevention rule is set for the shared-with company's child accounts.

Position Transfer

Position Transfer prevents self-matching in the same account, and is enabled using the Order Cross Prevention setting when creating a new account. If set on a parent account, any child sub-accounts of that parent account also inherit the Position Transfer setting.

When a matching order is detected in account with Position Transfer enabled, the resting order is canceled or the working order quantity is reduced by the size of the aggressive order. A fill is created by TT and sent to each account. If the aggressive order was larger than the resting order, then the remainder of it will be sent to market. In the TT Trade application, the results of the position transfer are logged in the Audit Trail and Fills widgets.

Once your order is submitted and it is determined that there is a working order that matches and could potentially fill the order, the new order is held and Position Transfer attempts to cancel or change the existing order based on the quantity of the new order as follows:

  • If the working order quantity is the same as the held order quantity and can be matched internally, cancel the working order. When the exchange confirms the order cancellation, delete the held order.
  • If the working order quantity is greater than the held order quantity, lower the working order quantity to equal the held order quantity and delete the held order.
  • If the working order quantity is less than the held order quantity, cancel the working order. When the exchange confirms the order cancellation, reduce the quantity of the held order and submit it.
  • If the working order is filled between the quantity check and the order action, TT sends a negative confirmation to the exchange. If the exchange acknowledges the negative confirmation, then the held order is submitted.