Fundamental Interactions Accommodates the Shifting Landscape for Pre-Trade Risk

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FastProxy provides advanced functionality for a wave of emerging pre-trade risk challenges presented by increased scrutiny on broker to broker risk compliance and new proposed wash sale requirements.

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The FastProxy gateway provides these non-member broker firms with an end to end pre-trade risk and routing service bureau for connecting and trading with their sponsoring brokers.

Fundamental Interactions has expanded its client base as a result of recent shifts in the landscape for pre-trade risk control. Foremost among the recent changes are intensified FINRA enforcement levels on broker to broker pre-trade risk compliance and proposed expansions to FINRA’s requirements for wash sale prevention.

Broker to Broker Enforcement:

The FastProxy pre-trade risk gateway is fast gaining in popularity among non-member broker dealers who utilize the sponsored memberships of executing brokers to get to the US equities exchanges. While FINRA had previously focused 15c3-5 enforcement efforts primarily on executing brokers, enforcement has now become an important concern for every broker in the chain on the way to the exchange. This coincides with the abrupt exit of a handful of large clearing brokers from the sponsored access space, who had previously provided low cost bundled execution and clearing for a wide swath of the non-member brokerage community. With this departure, a number of the full service brokers at major investment banks have stepped in to fill the void, providing large scale sponsored access execution platforms to the non-member broker community.

The FastProxy gateway provides non-member broker firms with an end to end solution and service bureau for trading with the primary full service brokers. This includes FIX integration, connectivity and comprehensive low latency pre-trade risk management. New clients of the system accredit their decision to use the platform with ease and speed of on-boarding, the breadth of integration with broker dealers and trading platforms as well as overall affordability of the service. “Our clients can quickly and inexpensively redirect all of their order flow through our system with minimal hassle or additive latency,” says Julian Jacobson, President and C.O.O. of Fundamental Interactions Inc. “We are certified with all of the primary brokers and our platform is integrated with all of the main EMS/OMS systems on the street.” Clients of the service have access to a comprehensive desktop console for administering and monitoring pre-trade risk, as well as drop copies to clearing firms, reporting and a variety of value added features.

Wash Sale & Internalization:

FINRA’s proposed revision to Rule 5210 presents a substantial challenge for many broker dealers. The rule targets wash sales occurring not only due to orders sent by a single algorithm, but also wash sales that might result from the interaction of multiple related algorithms operated by a single firm. The proposed rule has caused concern for firms that use a mix of different trading platforms.

The FastProxy system aggregates and monitors position information on orders passing through its routing gateways in order to match or reject orders that would otherwise cause wash sale violations. Clients can direct order flow from various different systems, through FastProxy gateway, where an aggregate view of orders and positions is maintained at low latency and control can be flexibly applied at various levels of the account structure. Clients using the system to internalize their orders benefit from price improvement, tape rebates and savings from the avoidance of clearing and exchange fees.

About Fundamental Interactions Inc:

Rising to challenges and opportunities posed by regulation, technology and market structure - Fundamental Interactions Inc. engineers global, multi-asset trading appliances which deliver targeted business advantages to broker dealers, hedge funds and proprietary trading firms. The company's products fall into three primary categories: 'FIN - Trading Appliance', 'FIN - Virtual Exchange' and 'FIN - FastProxy'.

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Julian Jacobson

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