Introduction on Trading Limits
Trading limits enable market participants to proactively manage their risk exposure, and thus constitute a cornerstone for securing the functionality and integrity of commodity wholesale markets.
Trading limits are technically provided in the trading system of the exchange or the clearing system of ECC and are contractually agreed between the Clearing Member and the Non-Clearing Member.
ECC and its Partner Exchanges have implemented a range of trading limit services for their customers including:
- Quantity Limits
Order Quantity Limit or Transaction Size Limit (“Fat Finger Limit”)
Limit that constitutes a maximum amount of commodity units or contracts a trading participant can trade per individual trade
Total Purchase Quantity Limit
Limit that constitutes a maximum amount of commodity units or contracts a trading participant can trade within a timeframe defined by the exchange, e.g. one exchange trading day or one trading session.
- Financial Limits (also Cash Limits)
Limit that constitutes a maximum financial exposure up to which a trading participant can trade within a timeframe defined by the exchange, e.g. between two ECC booking cuts or on one exchange trading day.
ECC trading limits can be further differentiated according to the point in time when the limit is applied:
- Pre-Trading Limit
Limit taking effect before trade conclusion. Non-conforming orders are rejected by the Partner Exchange; hence do not lead to an increase of the risk position of the client at the Partner Exchange.
- Pre-Clearing Limit
Limit that takes effect on trade transfer from the Partner Exchange to ECC. Non-conforming trades are rejected by ECC; hence do not lead to an increase of the client’s risk position at ECC.
- STP Limit
Limit that takes effect on STP registered trades at ECC. Non-conforming trades are rejected by ECC; hence do not lead to an increase of the client’s risk position at the Partner Exchange and ECC.
One centralized channel for Trading Limit management
ECC offers its customers a comfortable process for managing trading limits at all ECC Partner Exchanges through ECC as a centralized channel. Any limit setting or modification by Clearing Members or Non-Clearing Members respectively is managed via ECC, which has assumed the role of an intermediary between its connected Partner Exchanges and Clearing Members.
ECC cooperates with its Partner Exchanges to further improve the existing limit management functions by designing and implementing new trading limit functionalities.
ECC offers a self-service Limit Management System embedded in its customer portal, the ECC Member Area. Through this system, users can view, create, update or delete Trading Limits in a completely automated process, and also generate reports on the currently maintained Trading Limits. Members of ECC can request read-write access to this system allowing them to modify trading limits for their associated Trading participants. Additionally a read-only access is offered.
For further details regarding the latest developments, please refer to the ECC’s “News” area for the relevant circulars.