Hybrid Hedger Tuning - Hedging Blocks

If hybrid model constraints are too restrictive for the liquidity available to the hedging model, it can prevent the hybrid from trading and hence allow large amounts of risk to build up and sit in the risk book.

Hedging model constraints will be continuously logged and can be monitored in the Trading Overview Hedging tab, alerts can also be set to route to slack when thresholds have been hit.

Common constraints that block the hedgers from firing are:

• OK_QuantityBelowMinimumLag
• OK_FilledQuantityOnTrack
• OK_FilteredAllLiquidity
• OK_NoLiquidityInsideCappedWorstPrice
• OK_SpreadNotMatched
• Signal
• QSpread

OK_QuantityBelowMinimumLag

The equivalent position is smaller than the configured minimum the DTA Aggressive allocator needs to be behind to fire. Note that the step size may also need to be configured to allow the hedger to fully clear any risk that is incrementally over the minimum:

• The step size defines the quantity increments between the minimum and maximum wave quantities that the aggressive allocator will be allowed to fire for. i.e. if min is 500k and max is 2m with a step size of 500k, only in increments of 500k will be aggressed.

hedging.rules.aggressive.dynamicOrderSpeeds -> Minimum Lag Normal Qty

OK_FilledQuantityOnTrack

The rate of reduction in equivalent position is in line with the configured order speeds

hedging.rules.aggressive.dynamicOrderSpeeds -> Required Equivalent Var Reduction Per Second

OK_FilteredAllLiquidity

This filters the liquidity from the available markets for the following:

1. All quotes are younger or older than minimumOrderAge/maximumOrderAge in the Aggressive Strategy Parameters
1. hedging.rules.profiles.profileDefinitions -> Minimum Order Age
2. The static liquidity multipliers have filtered all LPs (if set to zero)
1. This controls how much quantity we can expect to execute with respect to the quantity we see on the market. Values < 1.0 indicate that the market has last-look and values > 1.0 indicate hidden liquidity.
2. hedging.rules.aggressive.liquidityAdjustment.staticAdjustmentFactors.DTA
3. LPs recent fill ratio are too low and so filtered out by the dynamic liquidity multipliers
1. LPs with a 0% fill ratio the LP would be blocked entirely.
1. hedging.rules.aggressive.liquidityAdjustment.dynamicFillRatioAdjustment.DTA
4. Market throttles (not generally used) restrict the number of orders to be sent per market, once reached can prevent sending any more orders
1. hedging.rules.execution.marketThrottles

OK_NoLiquidityInsideCappedWorstPrice

The spreads on the available LPs are wider than the configured Max spread cap in the Liquidity Strategy Parameters

hedging.rules.profiles.profileDefinitions -> Maximum Spread Relative To Base Spread

OK_SpreadNotMatched

The RollingMeanSpread and DTA ExecutionEstimation configuration not met the required config for the hedger to fire

hedging.rules.aggressive.dynamicSpreadAnalyticsConfiguration

SIGNAL

e.g. EURUSD[OR-IMI-IMS], the Pull Away Signal Alias Predicate has temporarily deactivated the rule due to the signal being against the proposed trade side.

QSpread

e.g. QSPREAD[MW[100.0-ALL]] <= 0.9, the rule has been disabled due to the current available spreads exceeding the spreads observed in the sample distribution

A normal distribution is created from a specified number of ticks over given a time period (on a rolling basis), the hedging rule will only fire if the current observed spreads are in the top Xth percentile, otherwise the rule will be disabled and prevented from hedging.