What is a Kill Switch?
A Kill Switch is any hardware or software tool that can shut off or disable a primary system in case of a malfunction in order to prevent a catastrophic result. In case of an algorithmic trading system, a kill switch will shut down or block the malfunctioning algorithmic trading system to prevent major capital losses.
Why does one need a Kill Switch for a trading system?
Trading systems are software applications created by software programmers. Trading systems are changed and redeployed periodically by software developers. Like all software programs, it is possible that trading systems have bugs or software errors. In the past, software errors have caused catastrophic losses for trading firms, brokerage firms, and exchanges.
- In May 2012, Knight Capital Group lost over $440 million in a single day due to programming or configuration errors.
- In 2013, Goldman Sachs lost over $100 million dollars when their algorithmic trading application went haywire in the options markets.
What is KillSwitchPlus?
KillSwitchPlus is a real-time system for monitoring trading activity and detecting anomalies in trading activity. KillSwitchPlus is a kill switch that can block trading activity for an account, a user, a firm or a trading group with laser-like precision. KillSwitchPlus is designed to block the smallest unit of trading possible to not disrupt trading. Instead of simple on or off switches, KillSwitchPlus provides a gradient of options.
What are the unique features of KillSwitchPlus?
- Targeted to kill only a specific account or a user
- Unique technology to ensure blocking/disabling of the account
- Unique technology to cancel all or some working orders
- Unique technology to liquidate positions customizable liquidation rules and multiple liquidation algorithms
- Integrates with multiple ISVs, and exchanges
- Integrates with SDMA systems with zero added latency in the critical trading path
- Account and User profiling
- Provides a complete API for 3rd party trading systems or trading algorithms to integrate with RiskResponder and KillSwitchPlus
- Provides alerts, notifications via API directly to trading algorithms or trading systems
- Patent Pending
Why KillSwitchPlus?
The issues faced by algorithmic trading in the financial industry cannot be resolved by implementing a “harsh kill Switch” that cuts the connectivity pipe between the trading system and the exchange. Such implementation can introduce more risk and prevent the client from reducing any open market risk exposure. Unfortunately, most attempts in the past of introducing a “kill Switch” took the “harsh” approach and relied on humans to make the call when technology and market moves were already much faster than humans. These issues are interconnected and have to be addressed layer by layer in a fast, intelligent and meticulous way.
Who needs KillSwitchPlus?
Brokerage firms, FCMs, Proprietary trading groups, any firm that has a need to monitor trading activity.
How does KillSwitchPlus work?
The advanced technology around KillSwitchPlus consists of an intelligent network of agents and a central hub that monitors and controls trading activity at all times. The KillSwitchPlus profiling agent understands the trading strategy and profiles the major risk points. The KSP agents can determine the the timing, location, and specifics of which trading activity to be stopped and communicate back to the central hub.
How does a KillSwitchPlus differ from other KillSwitches?
While most other risk systems in the marketplace would cut the pipe between a trading system and the exchange, KillSwitchPlus has the intelligence to automatically block only the offending account using a specific ISV and trading a specific exchange; allowing other customer accounts to continue trading.
Furthermore, KillSwitchPlus has a unique offering that allows cancellation of orders and liquidation of positions across 30+ global exchanges.