Importance Of Trade Account Management
When it comes to trade account management, dealer limits are used to limit the institutional proprietary trading risks. Overnight limit is the limit of the open position at the end of the working day. It corresponds to the position limit so the risk limit for the individual trader. Depending on the assessment of market risk (4% currency change eg 1 % interest rate) or more sophisticated methods and the calculation of risk per trader in a scenario analysis are defined.
Intraday limit or daylight limit – the permission to temporarily establish an open position during the work day. This intraday limit is set depending on the qualification and position of the dealer and the market liquidity of the traded instrument. The limit can also be dependent on whether a bank in this instrument holds a market-making function or not.
Quote limit is the limit of the volume for which must be quoted. Once the specified limit is reached, a trader has the right to request to name a price at which the bank is willing to enter into commercial amounts. Similar to the intraday limit the quote limit of the qualification and function of the trader, the market liquidity of the instrument and the role of the bank depends in this market.