The Purpose of Credit and Capital Limits

What this video covers

• Why a credit limit caps the firm's exposure from customer activity rather than serving as a customer credit facility
• The distinction between credit thresholds for customer activity and capital thresholds for the firm's own-account activity
• How due diligence covers trading activity across markets and products, while decrementing applies to securities orders sent to trading venues
• Why venue-specific sub-limits cannot borrow unused capacity from other venues and must be assessed assuming maximum usage elsewhere
• Why thresholds are measured against orders entered, including open unexecuted orders, rather than executions obtained
• The three required erroneous-order triggers: price parameters, size parameters, and duplicative orders
• Why controls must reject orders before routing, and when market maker quotes and electronically touched manual orders require automated pre-trade controls