MPS Global Taps Bon Trade to Offer SEC-Compliant Pre-Trade Risk Solution

Agency-only broker/dealer MPS Global Securities has jumped on the bandwagon of service providers offering pre-trade risk solutions that comply with the SEC’s November 3 rule banning unfiltered access to exchanges and alternative trading systems.

The MPS Global low latency solution – or MPSG LLS – is designed for high frequency trading and is powered by Bon Trade Solutions’ Market Centurion risk product. A FIX application programming interface (API) provides access to major US equity exchanges.

According to Brian Mulcahy, managing partner at MPS, “The SEC made it clear about a year ago that naked, or unfiltered, access to exchanges would be banned. To get ahead of the regulations, we started to talk to clients about what this would mean to them and in February this year we began to look for a technology partner we could work with to provide pre-trade risk controls.”

The company considered about 10 potential partners before selecting Bon Trade Solutions and its Market Centurion risk product. “There are dozens of technology providers of risk systems, but the need is to balance functionality and speed. The buyside wants speed, but it must have a viable risk platform,” says Mulcahy.

“We chose to partner with Bon Trade Solutions because we have a long-standing relationship with the company and understand its business. Statistical analysis of Market Centurion shows good throughput and the software is flexible. This means client specific rules can be put in place showing that MPS has a reasonable means of controlling each client’s trading.”

The Bon Trade Solutions risk platform has been bundled with the MPS trading platform to integrate risk controls and order management with a non-intrusive FIX trading API. MPS claims latency measurements of market access are in microseconds.

Customers have a choice of three entry points to the MPS technology: those running a direct line from their own data centre into an exchange can divert through an MPS rack located in the exchange building – each rack runs an instance of Market Centurion – and on into the exchange with little interruption; those with rack space in the exchange and a trading API but no broker can cross-connect into an MPS rack to use the risk platform; and those without rack space can locate their servers in an MPS rack to handle risk and order management.

“The traders can be as far away from the exchange as they like, or they can collocate in MPS racks. Either way, they will be in compliance with the SEC rule,” says Mulcahy.

Victor Tartaglia, managing director of Bon Trade Solutions, says: “Our Market Centurion product provides a cost-effective pre- and post-trade risk management solution. The combination of flexible deployment, low latency and cost make this a compelling offering.”

MPS expects to garner interest in MPSG LLS from ‘anyone wanting a technology savvy and fast way to trade in a competitive, technology-based environment’, and suggests high frequency traders, algo traders and arbitrage traders will be among its existing and potential customers. The first implementations of the platform are underway, with MPS anticipating tens rather than hundreds of orders for the solution over the next 12 months.

“This is a very competitive space and we are certainly not the only provider out there,” says Mulcahy. “But our solution uses advanced technology and offers vey low latency. Our niche is to combine this technology with extremely attentive support, making a full service offering for our clients,” says Mulcahy. Others already in the game include FTEN Inc., NYSE Technologies, RealTick and Quod Financial, but more will surely follow.