Alternative derivative exchange

Risk management

Proactive risk management for Smarter Trading.

At ADE, we have implemented a comprehensive suite of risk management systems that work harmoniously to uphold the integrity of every trade executed on our exchange. These systems play a vital role in our risk novation process, ensuring a secure trading environment for all participants.

One of our core risk management features is our lot-based pre-submission risk allocation setting. This setting is applied at various levels of our system hierarchy, including Clearing Members, Companies, Accounts, and Users. It allows for precise risk allocation and control at contract and asset levels, strengthening risk management throughout the trading process.

To further enhance risk control, we conduct mark-to-market checks for every tick change against the collateral balance of each trading account on our exchange. This mechanism enables us to promptly assess risk exposure and inform our "No risk Taking" or "Cut" parameters, which can be applied to individual accounts as needed.

In addition to the aforementioned systems, we employ a dynamic Initial Margin Requirement (IMR) mechanism that adapts to the underlying market's volatility. This ensures that margin requirements align with market conditions and mitigate potential risks effectively. Moreover, our markets incorporate a price reasonability limit that dynamically adjusts based on the market's IMR and volatility, promoting fair and stable trading practices.

We have implemented a Position Concentration Margin Escalator to discourage excessive positions and prevent short squeezes. This mechanism acts as a safeguard against undue concentration and promotes market stability.

Lastly, we enforce a market deleverage procedure just before the market expiry for most deliverable contracts listed on ADE. This procedure ensures a smooth transition and facilitates orderly settlement processes.

At ADE, our multifaceted risk management systems work in synergy to foster a secure and reliable trading environment, empowering traders while upholding the highest risk management and market integrity standards.