ION has enhanced its XTP Risk JANUS solution through the use of AI to optimise pre-trade risk management and balance speed and accuracy in pre-trade validation.
XTP Risk Janus is an intraday solution for pre-trade to post-trade risk management.
The new development has been created by LIST, an ION company, and integrates the XTP Risk Janus and its Margin Engine often used in cleared derivatives trading, to improve the accuracy of CME’s SPAN2 Approximation algorithm, launched in 2023.
The solution, which has been enhanced using AI, is expected to allow traders to obtain faster and more precise margin estimates, improving decision making and risk control outcomes in real-time.
“We explored the possibility of using AI to apply a correction factor to SPAN2 Approximation to bring it closer to the original SPAN2 calculations,” said Riccardo Bernini, head of the financial engineering team at LIST.
“The outcome is surprisingly good and gives our clients faster, more precise margin estimates. It ensures that they can effectively manage risk and make informed trading decisions with the speed required for pre-trade validation.”
The new model integrates the CME SPAN 2 deployable library to calculate CME margin requirements for cleared derivatives trading and provides the option to use the group’s later algorithm, CME SPAN2 Approximation when quicker calculations are needed.
ION has said the innovation will address issues associated with the CME SPAN 2 original model. Through improving the accuracy of CME’s SPAN 2 Approximation calculations with AI, LIST’s solution is expected to produce results which closely match the original model while also maintaining speed-efficient pre-trade validation.