DGCX implements SPAN-based margining for risk management

DUBAI — Dubai Gold and Commodities Exchange (DGCX) yesterday announced that it has commissioned FIX Gateway and introduced SPAN-based margining system for effective risk management.

By Babu Das Augustine

Published: Wed 16 Aug 2006, 10:03 AM

Last updated: Sat 4 Apr 2015, 2:13 PM

DGCX has implemented Standard Portfolio Analysis of Risk (SPAN) based margining system for enhanced risk management with technical support from Financial Technologies. Globally SPAN is considered as the benchmark for any exchange to substantiate the robustness of its risk management system. DGCX is the first exchange in the Middle East to implement SPAN-based risk management system.

“It has been our constant endeavor to keep improving the sophistication level of DGCX. DGCX went live on a very sturdy trading platform. We have seen that the platform withstood the extreme fluctuations in precious metals prices. Financial Technologies will continue to deploy enhanced risk management systems that will enable the exchange and its members to spread their business further and at the same time monitor risk through extremely well defined parameters,” said Arshad Khan, Director of Financial Technologies and Director of DGCX.

The standard portfolio analysis of risk method is based on the estimation of the overall risk exposure of a portfolio comprising of futures and options position for calculation purposes.

Initial margin calculated using SPAN therefore represents the most unfavourable liquidation value of a portfolio out of several scenarios representing adverse changes in market conditions. This data is stored in risk arrays, which are specific to each contract and updated on a daily basis.

FIX Gateway allows any DGCX member who wishes to connect their proprietary trading applications on a real-time basis with the DGCX central trading system.

There are several DGCX members who have already built interface between their proprietary trading systems and DGCX central trading platform using FIX Gateway. The Financial Information eXchange (FIX) Protocol is a technical specification for electronic communication of trade-related messages. It is a globally accepted standard of messaging specifications developed through the collaboration of banks, broker-dealers, exchanges, industry utilities and associations, institutional investors, and information technology providers from around the world.

DGCX FIX Gateway is developed by Financial Technologies conforming to FIX 4.2 protocol specifications. Financial Technologies is already working on upgrading this product to make it FIX 4.4 compliant which is by far the latest development in FIX community.

“Virtually every major exchange, brokerage houses and traders globally use FIX protocol for electronic trading. Now members of DGCX who are also members of other international exchanges will find it very useful to connect their global dealing rooms to DGCX using FIX Gateway,” Khan said.

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