Risk Limits

Risk Limits

Market Impact Check

The Market Impact Check in TT allows companies to monitor trading activity and prohibit trading in their accounts if certain risk limits are breached. As an administrator, you can set limits on price movement and the percentage of total traded volume allowed per instrument in each account.

If both of these account limits are exceeded, subsequent order actions except cancellations are rejected. As an administrator, you can set the period of time order entry is prohibited in the account. At the end of the defined "cooling off" period, trading automatically resumes in the account.

TT provides a company level setting on the Company | Settings | Profile tab that allows administrators to opt in for using the Market Impact Check service.

Note: The Market Impact Check does not apply to wholesale orders or synthetic parent orders. Subsequent child orders of a parent algo or TT Order Type are included in the checks.

Market Impact Check Configuration

The Market Impact Check section of the account limits screens includes the Participation Rate (percent) and Price Movement settings.

To enable the Market Impact Check service and set its risk limits for your company, refer to Configuring Market Impact Check.

How Market Impact Check Works

When enabled at the company level and configured as part of the account or risk group limits, the Market Impact Check service does the following:

  1. Checks the price movement of each configured rolling time frame, where:
    • T1 = Current time in seconds
    • P1 = Price at T1
    • T2 = T1 - <previous time frame in seconds> (e.g., 60 seconds ago)
    • P2 = Price at T2
    • Price movement (ticks or percentage) = P1 - P2
  2. For each price movement limit that is exceeded (ticks or percentage), check the participation rate of traded volume for each configured time frame.
  3. If both the price movement and participation rate limits are exceeded, TT rejects all subsequent orders for that account.
  4. Trading automatically resumes in the account after the cooling off period time has elapsed.

Market Impact Check Account Hierarchy

When the Market Impact Check is triggered for a parent account, it's cooling off time period is compared to all accounts in the hierarchy and the highest setting is used:

  • If the parent account's time is > the child account's time, the parent account cooling off time period is applied to the child account.
  • If the parent account's time is < the child account's time, the child account uses it's own set time period.
  • If no cooling off period is set for a child account, its parent account's time period is applied to the child account.

Market Impact Check example

In this example, Market Impact Check is enabled for the company and configured for all CL futures contracts for account "A.111".

For the Price Movement settings, Ticks are set to "3" for a 1 min interval and the Participation rate is set to ".5" (50 % of total traded volume in the account).

An optional cool off period of "30" seconds is also configured for the account on the Accounts | Settings tab for account "A.111"

Based on the price movement check, the last traded price of the instrument is checked against the last traded price in the previous 1 minute interval. If the difference between the prices is outside the "3" tick range, TT checks the accumulated fill quantity in the account and determines the percentage of total traded volume in the account (i.e, the participation rate).

If the participation rate meets or exceeds 50%, subsequent orders are rejected in account "A.111" for a 30 second cooling off period. Working orders in the account are not affected and continue to work in the market. After 30 seconds, order entry is allowed for the account.