Limits are set before a position exists.
Risk control is implemented in the systems rather than left to judgment under pressure.
Every trading firm loses money on some positions. What separates one that survives from one that does not is whether the size of those losses was decided in advance, calmly, or discovered afterwards.
The controls below are set before capital is committed and enforced by the systems that place the orders. None of them depends on someone making a good decision during a bad hour.
Position limits
Each strategy operates within position limits set before it receives capital. Limits reflect the liquidity of the instruments traded, so that a position can be exited without the exit itself moving the market against the firm.
Loss limits
Loss limits apply at the level of individual strategies and at the level of the firm as a whole. The firm-level limit exists because strategies that appear unrelated can become correlated precisely when it matters most.
Automated enforcement
Breaching a limit reduces or halts trading automatically. Enforcement is implemented in code, ahead of time, rather than requiring a human decision in the moment the limit is reached.
Independent review
A strategy is reviewed by someone other than the person who researched it before it is allocated capital. The reviewer's task is to look for the ways the result could be an artefact rather than to confirm it.
Continuous monitoring
Positions, exposures, and system connectivity are monitored while markets are open. Deviation from expected behaviour is escalated rather than absorbed.
Authority to halt
Named individuals hold standing authority to halt trading, in whole or in part, without seeking approval. That authority is deliberately easier to exercise than to question.
Incident review
Operational incidents are reviewed after the fact and the findings are written down. The output is a change to a system or a limit, not an explanation.
On risk generally
Trading financial instruments involves risk, including the loss of capital. No control framework removes that risk, and nothing on this page should be read as suggesting that it does. The controls described here are intended to bound the firm's exposure to its own strategies; they are not a guarantee of any outcome.
The firm trades its own capital. No third party bears the risk of its trading.