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2.6.3 Risk Management and Financial Controls

Past version: Effective from 15 Mar 2013 to 13 Nov 2016

(1) A corporate Member is required to have written policies and procedures on risk management controls and demonstrate compliance in the following areas:
(a) monitoring the credit risks arising from the acceptance of all orders on at least a daily basis;
(b) monitoring all account activity on an intraday basis;
(c) ensuring that:
(i) automated pre-execution risk management control checks are conducted on all orders, including credit control checks on all orders;
(ii) there are appropriate internal controls for the setting and modification of any parameters of such automated pre-execution risk management control checks;*
(d) having error-prevention alerts to bring attention to possible erroneous entries of quantity, price and other data fields;^

^ Refer to Practice Note 2.6.3(1)(d).
(e) defining and managing the Member's sources of liquidity to ensure that there are sufficient liquidity facilities to meet increased settlement obligations;
(f) limiting the impact of significant market movements through the use of tools such as cash flow projection, stress testing or position limits; and
(g) maintaining a strict separation between the credit control, trading, dealing and marketing departments so as to ensure independence and mitigate the risks and consequences of conflicts of interests.#

#Refer to Practice Note 2.6.3(1)(g).
(2) A Member referred to in Rule 2.6.3(1) must have automated processes in place to monitor at the firm level if the Member is at risk of breaching capital and financial requirements and prudential limits on exposures to a single Customer and a single Contract, so as to restrict trading activity or inject additional capital if necessary.

Refer to Practice Note 2.6.3(2).

Amended on 15 March 201315 March 2013.