Drop Copy

Traditionally exchanges and other trading venues are “producers” of Drop Copies. With executing / clearing brokers and trading firms being “consumers” of Drop Copies. MarketFactory has made some changes to this traditional model by synthesising drop copy messages using the information obtained from the API server (in a standard format) following the execution of a trade. The purpose of this message is to act as a supplement to a customers risk management model by producing a comparable series of messages that can be compared to the venue drop copy feed to identify and deal quickly with any inconsistencies.

"Drop copy" can be viewed as an element or contributor to risk management that equips market participants with near real-time copies of trade reports and messages related to orders. Drop Copy as a report then summarises a participant’s execution activity on a trading venue, to provide an accurate picture of the firm's position in the market.

Drop Copy as a Risk Management Tool

Robust risk management policies and procedures are critically important aspects of any market participant’s trading operation. To aid in the implementation of and adherence to those policies and procedures, many trading venues have provided their participants with Drop Copy feeds. Consumers of Drop Copies have different methods of leveraging Drop Copy functionality to meet their individual risk management needs. The following examples illustrate possible uses of Drop Copies by Consumers:

Consumers may use Drop Copies for real-time trade reconciliation. At a minimum, they typically compare the information provided by a Drop Copy in real-time with the trade notifications received from production trading sessions. This comparison process allows firms to reconcile their electronic trading activity with an independent source of exchange-provided trade notifications. In the event a discrepancy is found, the responsible party or parties may take action immediately to address trading risk, determine the cause of the discrepancy, and resolve any issues.
Consumers may also use Drop Copies to supplement their risk management process. Trading firms, for example, may have multiple trading sessions on a single trading venue. Drop Copies provide market participants with the ability to consolidate multiple trading session reports into a single data feed. This consolidated data feed may then be used by operational staff to monitor a participant’s trading activity.
Brokers that provide their clients with sponsored access to trading venues may use Drop Copies to monitor the trading activity of those clients. Brokers use Drop Copy to monitor:

When trading activity approaches limits established by the sponsoring broker.
Unusual changes in intraday trading activity that may indicate a potential problem at the client.
Activity that may increase positions in accounts that are in a “liquidation only” state.

All events would lead to a discussion with the client to understand the situation and take appropriate action.

For more information on the MarketFactory provided Drop Copy please click here