Automated Counterparty Classifier - Overview

• Auto-Classification Summary
• Classifications types
• Tying Classifications to Risk Management
• Adding/Removing a Client Account (counterparty) from the broker list
• Editing whitelist or blacklist for an automated classifier
• Using Classifier in Liquidity Distribution
• Counterparty white/black list reviews

The classifier dynamically analyses trends in historical and real-time counterparty trade data in search of repetitive, well-known patterns and other technical factors displayed in their yield profiles. This means trading styles are picked up in real time rather than after the event.

Counterparties are then assigned tags relating to various risk-based strategy buckets based on their performance and trading behaviours in order to optimise flow management and profitability.

Typically classifications can be tied into execution behaviour to:

• broker flow, or even over hedge flow (signal follow)
• slow down bad flow at source, by applying
• increased last look (with no price improvement)
• increased liquidity reduction

Tying these classifications to bespoke risk management and execution styles enables Compass to automatically manage flow according to changing trading styles, allowing you to monetise a higher proportion of a book whilst significantly reducing operational overheads.

The classifier also allows for manual intervention via blacklist/whitelist to control the execution and management of individual counterparties.

Reviewing automatically classified counterparties

The classifier screen is accessed via Risk Management in MFXCompass:

This shows the aggregated yield profile of all flow classified under each strategy tag, the time frame the analysis has been performed over and the saving or PnL opportunity available from managing the suggested flow

The blacklist and whitelist counterparties are also plotted on the charts, allowing you to quickly analyse if previous manual interventions are still relevant.

Blacklists and whitelists are viewable and editable to the right of the chart. This also allows you to see the classifications that have been automatically assigned.

Clicking the Echo symbol will link to the classified counterparty's Yield Profiles, where you can drill down into the underlying flow using MFXEcho's filtering and grouping controls to assess counterparty performance.