Synthetic indices risk management for dealing desks

On FX or gold, a broker can pass risk to a liquidity provider. On synthetic indices there is no external market, so the broker is always the counterparty. Risk is managed through pricing and limits, not hedging.

The upside is predictability. Every Aleatra index follows a published model, so the statistical behaviour is known in advance. There are no news events, no gaps at the weekly open and no correlation with your real-market book.

• Start from volatility. Higher-volatility indices need wider spreads. A spread that suits FX Volatility 20 will be too tight on FX Volatility 100.
• Price spike indices separately. On Boom and Crash, the drift between spikes is small, so the spread decides much of the outcome for short-term traders.
• Review after launch. Use the first few weeks of trading data to adjust spreads by symbol and by client group.

• Margin by behaviour. Set higher margin on spike and trend-switching indices than on low-volatility indices.
• Maximum lot per order. Caps single-ticket exposure, especially on spike indices.
• Net exposure per symbol. Monitor net client position per index. On Boom and Crash, positioning often builds on one side.
• Stop-out and spike handling. Decide how stops are filled when a spike passes through them, and state it clearly in your terms.

Clients will occasionally dispute a fill or a stop-out, especially around spikes. Keep these in place from day one:

• Stored tick history. Every Aleatra tick is stored with a sequence number and timestamp, so you can show the exact prices at any moment.
• Seed commitments. A hash of each feed's seed is committed in advance, so you can show the prices were not changed after the fact.
• Clear terms. Describe each index, its behaviour and your spike fill policy in your client documentation.

Prop firms run synthetics on demo infrastructure, so the risk is in payouts rather than client P&L. Set challenge rules per symbol family, such as maximum lot size and daily loss limits on spike indices, and use tick history in payout reviews. See synthetic indices for prop firms.