TT uses the following formula to calculate an account’s position, specifically an account’s position when determining if an order should be allowed to enter the market.
Current Position + Working Orders on Buy/Sell side + Possible Fill from Current Order = Worst Case Position
An account’s worst case (long or short) position is compared against the account’s Maximum Position limits. Long (Buy) positions are considered positive and short (Sell) positions are considered negative.
| Example | Worst Case Position |
|---|---|
| Long Side Example: Position is Long 5 in account ABC (which does not belong to an account group). Working Buys for a total of 4 contracts in account ABC. Working Sells for a total of 3 contracts in account ABC. Trader enters an order to buy 7 contracts in account ABC. | What is the account’s worst case long position? Current Position [+5]+ Working Orders [+4]+ Possible Fill from current order [+7] = Worst Case Position [+16] |
| Short Side Example: Position is Long 5 in account ABC (which does not belong to an account group). Working Buys for a total of 4 contracts in account ABC. Working Sells for a total of 3 contracts in account ABC. Trader enters an order to sell 7 contracts in account ABC. | What is the account’s worst case short position? Current Position [+ 5]+ Working Orders [-3]+ Possible Fill from current order [-7] = Worst Case Position [-5] |
When an order is submitted, the following account position limits are considered:
- Can the account be used to trade the product or contract in question?
- Is trading allowed for this contract? (If there is a contract setting for the contract being traded, is trading allowed? If there is not a contract setting, is trading allowed for the product?)
- Is the order quantity less than or equal to the account’s maximum order quantity limit set for the product (or contract if set)?
- Is the WCP less than the account’s maximum position limit?
If these tests pass, the approved order is sent to the market.
Account maximum product position: Example 1
Account ABC has a maximum product position of 5 configured for ES. Trader_1 buys 4 ES contracts using account ABC. Trader_2 attempts to buy 2 ES contracts using account ABC. He is rejected because the Worst Case Net Product position for ES would be 6, and the account limit is 5.
Account maximum position limit in SAM account: Example 2
A max position limit of 5 ES contracts is configured for account ABC. A trader buys 3 ES contracts using account ABC. No other trader can place a buy order for more than 2 ES contracts in account ABC.
Account maximum position limits in multiple accounts: Example 3
Account A is created. Accounts 1, 2, and 3 are created as child accounts of Account A. A max position limit of 5 ES contracts is configured for account A. Limits are not configured for Accounts 1, 2, and 3. One ES contract is bought in each account. The ES position of account A is now 3. If a user tries to buy more than 2 ES contracts in accounts 1, 2, or 3, then the order will be rejected because they would exceed the limit of Account A.
Account position risk for order entry: Example 4
A trader uses account ABC and has the following risk limits:
- Product is ES
- Max Order Size is 5
- Max Position is 10
- Current Position is 0. No working orders
Question: Can the trader buy a 3-lot?
Answer:
- Is Order Size < Max Order Size?
(Is 3 less than 5? – Yes) - Current Position + Working Buys + Possible Fill = Worst Case Position
(0 + 0 + long 3 = long 3) - Is Worst Case Position less than or equal to Max Position Limit?
(3 < 10)
Result: Order is accepted.
Account position risk for orders in multiple accounts: Example 5
A trader uses account ABC, which is a child of Account 123. Account 123 has the following risk limits:
- Product is ES
- Max Order Size is 5
- Max Position is 10
- Account ABC has a current position of long 1.
- Account XYZ, which is also a child of Account 123 has a current position of long 8.
Question: Can the trader buy a 3-lot?
Answer:
- Is Order Size < Max Order Size?
(Is 3 less than 5? – Yes) - Current Position (cumulative position for Account 123 and all of its children )+ Working Buys + Possible Fill = Worst Case Position
(log 9 + 0 + long 3 = long 12) - Is Worst Case Position less than or equal to Max Position Limit?
(12 > 10)
Result: Order is rejected