OREANDA-NEWS. May 28, 2014. Recently, with its in-house financial market transaction management platform, ICBC has become the first bank to realize pre-trade risk control of financial market transactions, blazing a new trail to prevent “Black Swan” incidents in financial market transactions through pre-trade hard risk control in the system.

Financial market transactions in modern times have strict time limits. For example, prices are constantly changing in the trading of foreign exchange, securities and bulk commodities. As the transactions are carried out on a continuous basis and matched by the system, the dealers need to choose the right time to buy or sell while delay in the system may affect trading efficiency and cause the dealers to miss out on profitable opportunities. Pre-trade risk control is therefore very demanding in terms of business management model and system operating efficiency in financial market transactions, making it hardly practicable in reality.

As a result, the risk management of international financial market transactions usually takes place after the transactions are concluded. From the perspective of risk control, post-trade control has significant restraints. Particularly, given the “Black Swan” operational risk incidents in transactions by some financial institutions in recent years and serious impact on their business operations, the necessity to exercise pre-trade risk control on financial transactions has been further accentuated. How to effectively prevent the risks in financial market transactions and avoid the losses caused by dealers’ operational errors or even hostile operations has become a major concern and a thorny issue for the international financial community.

According to an executive with ICBC, in order to solve this problem, ICBC has built the first financial market transaction management platform in China and set forth the risk management concept of pre-trade hard control based on advanced information technology. ICBC has effectively improved system performance through technology innovation and realized pre-trade risk control with almost no impact on the efficiency of financial market transactions. Specifically, the Bank has build models in the computer system to examine the compliance of key risk indicators and exercise hard control before the transactions. It is analogue to creating a “moat” of risk control between the financial market transaction management platform inside the bank and the external systems to lock the “black swan” in the “cage”.

According to industry insiders, ICBC is the first financial institution in the world to extensively apply the concept of pre-trade risk control while developing and implementing pre-trade risk control technology, indicating the Bank’s leadership among its international peers in pre-trade risk control for financial market transactions.