In the world of “high-frequency trading” (HFT), where much dealing is done faster than the blink of a human eye, everyone involved needs to know as quickly as possible whether traders can stand by their bets. Exchanges where the trades are done need, in particular, to know whether their customers have brakes in place to stop computer trading getting out of control. Sensitivity surrounding super-fast trading has heightened since May’s “flash crash” in US stock markets, when the Dow Jones average plunged hundreds of points and rebounded in minutes.

Nils-Robert Persson, executive chairman at Cinnober, a Swedish trading technology company, says high-frequency traders need to have “a second opinion on their risk” since they pose new types of risks in markets. “Much of the clearing house technology that you are seeing now is based on old systems and is out of date.” Efforts to tackle the risks for clearers have led this week to the launch of a service by Eurex Clearing, the clearing arm of Deutsche Börse, which allows market participants to pre-set limits on the amount of risk they are prepared to take when trading. Thomas Book, member of the Eurex executive board responsible for clearing, says: “A reactive risk management approach is not sufficient to cope with the increasing speed in the trading environment.”

Xavier Rolet, chief executive of the London Stock Exchange points out an added problem. He says the fragmentation of trading across multiple venues – exchanges, “multilateral trading facilities” and “dark pools” – means national securities regulators often do not have access to a consolidated picture of trading and clearing activity. “The next stage in the regulation and management of equities clearing risk is likely to involve intraday exposure management.’ Alexander Justham, director of markets at the UK’s Financial Services Authority, says that it is working to ensure international regulation and laws provide for “the appropriate mitigation of intraday risk to central counterparties and their participants.” With such disparities in the information available, it is little wonder that regulators are only now starting to catch up.