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Case Study

Electronic trading global policy and Governance framework

FOCUS ON: Case studies, Risk, Finance,

SUMMARY

A major global investment bank requested Avantage Reply to assist with the delivery of a governance framework and global policy for electronic trading to satisfy the PRA SS 5/18 requirements. This covered the agency client electronic trading and principal algorithmic trading businesses across Equities, FX, Rates, Credit and Commodities in EMEA, US and Asia.

THE CHALLENGE

The client, a leading global investment bank, required its board to approve the electronic trading governance framework and had to define a global electronic trading governance policy, in order to meet regulatory requirements stemming from the SS 5/18.

In order to meet the PRA requirements, enhancements were required to the “Global Electronic Trading Governance Policy” to cover the following:

  • Algorithm approval (including multi-regional and remote booking algorithms);
  • Structure and ownership of the inventory of algorithms and risk controls;
  • Algorithm decommissioning;
  • Testing and Validation by the 1st and 2nd line;
  • Algorithm documentation standards;
  • Extension of the risk and control framework to include Liquidity and Cyber risks.

APPROACH AND SOLUTION

Avantage Reply delivered the governance framework and “Global Electronic Trading Governance Policy” following the stages below:

  • Gap Analysis: Enhancements to the governance framework and the policy were identified through a gap analysis against PRA SS 5/18 requirements.
  • Bilateral discussions: Meetings with stakeholders in the 1st and 2nd line to socialise changes of the governance framework and the policy.
  • Governance Framework Approval: Presentation of the governance framework at the Electronic Trading and Risk Committees for approval - with ultimate approval by the Board.
  • Global Electronic Trading Governance Policy Approval: Presentation to the Electronic Trading Committees for approval with a global 1st and 2nd line representation.

    • RESULTS AND BENEFITS

    The client was able to develop, agree upon and embed an electronic trading governance framework in line with regulatory expectations and tailored to their business model.