Operational risks have been a top concern for capital markets ever since the May 2010 flash crash. The worry was only exacerbated by the August 2012 software breakdown at market maker Knight Capital Group, the former parent of Direct Edge. Perceptions of those risks have changed drastically over the past year, even though risk itself may not have increased, observes Direct Edge CEO William OBrien. People are now much more focused on risk management as a product and as a criterion of evaluation of their vendors. The Jersey City, New Jerseybased operator of the EDGA and EDGX exchanges has therefore begun to productize that mind-set. In November it introduced EdgeRisk Controls, the first of a suite of risk management tools. EdgeRisk Ports followed in May; it lets clients test their systems in a simulated trading environment a clear response to the Knight debacle. This is really resonating with the marketplace, says OBrien, 43, a lawyer and former Nasdaq Stock Market executive who joined Direct Edge when Knight spun it off in 2007. Its not always about the new order type of the week.
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