Risk Management

What does this section regulate?

This section regulates relationships and risk management settings with your Counterparties (takers and other LPs). You may specify the buying power and requirements for the collateral if needed.

Once the KYC is complete, you will need the ID to set up a limit on your end.

What is a counterparty limit?

To start trading with each other, counterparties should set their counterparty limits against each other. It regulates the maximum possible open position with a particular counterparty. Within this limit you may specify: 1. Gross limit regulates the maximum possible open position counterparties may open.

2. Margin requirements restrict trading if the equity that your counterparty has with you exceeds the preset criteria

You may use both of them or gross limit only.

Which limit prevails if they are different?

In any circumstance, the system will always use the smaller value out of all. For example, if you allow your Taker to trade with you for 5 USD and your Taker limit is 10 USD, the system will use the 5 USD as a restriction for the maximum open positions.

What is a gross limit?

The Gross limit is regulating the maximum possible open position counterparty may open. You can make a trade only if you have trading limits set and your free limits are positive.

a. How do you calculate the gross limit? We take the absolute values of everything you see in the positions tab and summarize them using the formula below. Mind you that deposits also utilize the limit.

Formula:

MAX( |SUM(Long positions)|, |SUM(Short positions)| )

What if I set my limit in USD and my counterparty sets it in EUR? We use a mark-to-market type of accounting thus we will recalculate the EUR value back to USD and will use the smaller value out of the two. The same logic applies to limits nominated in crypto.

What is equity?

We summarize the value in USD of your open positions using the formula below: EQUITY = SUM(Positions) Since the base currency of our platform is USD, the assets you hold to maintain the required level of equity would be reevaluated against USD every 15 minutes. For example, if hold BTC as your collateral, its value may fall during the day to accommodate the limit in USD. Thus, the system would require taker to top up the account.

How do I set up a relationship with my taker?

1. Go to Risk Management .

2. Press 'Add risk profile'.

3. Input the counterparty ID that you receive from your taker.

4. Select the currency of your limit Input the Gross limit (buying power).

5. Enable margin requirement if you require collateral.

6. Specify markup if needed. Read more about markup here.

7. Press 'Add risk profile'.

Once your taker repeats the action on their end, they would start seeing your quotes.

Which currency I may use for the limits?

The one you use to evaluate your market exposure. Our recommendation is to use fiat currency (USD or EUR) for the limits.

Which limit prevails if they are different?

The smaller limit prevails over the greater one. For example,

Your taker has set a 30 USD of Gross limit however, you have set only 10 USD. The system will use 10 USD as a Gross limit

How do set up a taker if I require holding collateral?

You would need to enable margin requirement either upon set up or by clicking configure on the existing clients’ card. The values are in % and will be calculated from the value of the gross limit.

Here are a few tips on what those fields mean:

How do I disable trading with a particular counterparty?

You may disable trading with a counterparty by unticking the box in the card of the Configure menu. The trading will be stopped while allowing settlements. It will be convenient if you prefer to stop trading while settling, trade with your counterparty for special occasions (e.g. trading during banking hours), or if you wish to halt trading and still charge the overnight rate.

Can I disable trading of certain coins with a particular counterparty?

Click on 'Limits per Asset' on the client’s card. From this screen, you may limit the amount of a particular coin traded as well as stop trading it together.

You can set the limit per asset either in the currency of the asset or in the other currency you prefer. In the case of the latter, we will use the mark-to-market approach to determine the value of the asset.

Please keep in mind that if you have an open position nominated in the coin, your counterparty would still be able to trade with it until the moment the position is closed.

Can I restrict trading of the particular markets (trading pairs)?

Yes, whitelisting is a functionality that allows you to restrict trading to an approved list of instruments only. It is disabled by default; in order to enable it, please:

1. Click 'Assets & Instruments' in the left hand menu

2. Switch to the 'Whitelisting' tab

3. Toggle the 'Whitelisting' switch at the top right of the corner. After you have enabled whitelisting for the first time, all instruments become non-whitelisted by default.

In order to whitelist an instrument, you need to switch on the toggle (1) as shown on the screenshot above. There are two tips that can make this process easier:

2. Click here to collapse the list, hiding the counterparties level of hierarchy. It will make the list much more readable.

3. Use the Search functionality to search for specific instruments

How do I disable short sales for a taker?

If you wish to ban short sales of a certain asset, refer to the Assets & Instruments section - Assets tab.

From here, you have 2 options: ban short sales for all of your clients or impose the ban individually.

To set the short sales ban across all clients per asset:

1. Press "Configure"

2. Select the Asset or a Class of Assets you wish to impose the ban on

3. Select the group of clients you will impose the ban on

4. Toggle the switch for the Short sales ban

5. Click "Apply"

To set the short sales ban per client:

1. Press the pencil icon ("Configure")

2. Select 'Short sales' in the 'Adjust' field

3. Toggle the switch for the Short sales ban

4. Click "Apply"

To set the short sales ban across all assets and all customers

1. Press "Configure"

2. Select "All Assets"

3. Select "All Takers" or "All Sub-Accounts" depending on the service you are using. If you are a user of Finery Markets Liquidity Match, you will have to repeat the action twice

4. Toggle the switch for the Short sales ban

5. Click "Apply"

What are the Overnights (Long and Short)?

Overnight fees for long and short positions can be set on a per-asset basis, or for all assets, in the same 'Assets' tab. Please refer to Non-deliverable Trading for more information.

How would I liquidate the taker if their equity has fallen below the specified parameter?

Please contact us through Instant Messenger or through help@finerymarkets.com.