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Effective risk management is paramount in today's fast-evolving financial landscape. Firms must navigate mounting regulatory expectations while maintaining agility and operational efficiency. These themes were front and center in the third and final session of the Lines of Defense: A Modern Risk Playbook webinar series, The Intersection of Pre- and Post-Trade Risk, presented by Sterling Trading Tech and eflow Global.

Moderated by Sterling’s Chief Commercial Officer Julie Armstrong, industry experts Brian Saldeen, Senior Product Manager, Risk and Margin, of Sterling and Jonathan Dixon, Head of Surveillance, of eflow Global, discussed how firms can build unified, efficient risk frameworks that meet regulatory compliance requirements without compromising client experience.

Where pre- and post-trade risks meet

Dixon emphasized that pre- and post-trade risks inherently intersect at the point of trading activity. While post-trade surveillance examines what has already occurred – orders, executions, and even cancellations – pre-trade controls serve as the first line of defense, designed to catch issues before they arise. What’s critical, Dixon noted, is the shift toward behavioral analytics. This involves identifying anomalous trading patterns, such as a trader buying unusually large amounts or trading outside their typical schedule, that might signal insider dealing or market manipulation.

Saldeen complemented this perspective with a focus on market risk management. He explained that systems handling pre-trade and post-trade risk must be aligned. Discrepancies between these systems, or between a firm’s internal logic and that of its clearing or prime broker, can lead to unanticipated margin calls. For example, differences in how regulatory margin requirements are computed in pre- and post-trade systems can introduce inefficiencies and unnecessary risk.

Striking the balance: what clients need vs. what they want

Both panelists addressed the nuanced balance firms must strike between regulatory necessity and user-friendly functionality. Clients, according to Saldeen, need systems that satisfy compliance requirements, but what they really want are tools that provide real-time visibility and a seamless user experience. Whether it’s a retail trader previewing how a trade affects their margin or a fund manager understanding intraday risk exposure, visibility is key.

Dixon echoed this sentiment, highlighting the importance of user experience in trade surveillance platforms. He pointed out that while most vendors cover similar risk typologies, like spoofing or layering, it’s the presentation and accessibility of this data that differentiates platforms. Saving even a few seconds per alert can translate into hours of increased analyst productivity over time.

Customization, efficiency, and intelligent data use

A standout takeaway was the emphasis on configurability. Saldeen shared that Sterling’s custom house policy builder allows clients to tailor risk policies without requiring code changes. This agility helps firms respond to evolving market conditions and regulatory shifts without the drag of lengthy development cycles.

In closing, Dixon addressed a final question on evidencing market manipulation. Beyond the raw mechanics of a trade, he noted that proving intent, such as orders placed and cancelled within milliseconds or sudden behavioral deviations, requires sophisticated analysis of trader behavior, client types, and historical activity patterns.

Final thoughts

The key to navigating pre- and post-trade risk isn't choosing one over the other, but integrating both into a cohesive, agile system. As the industry continues to grapple with regulatory pressure and technological advancements, firms that prioritize unified controls, behavioral intelligence, and client-centric tools will be best positioned to manage risk efficiently and competitively.

For more insights from the Lines of Defense series, watch the full recordings to hear directly from the experts:

• Webinar 1: Real-time risk management in volatile markets
• Webinar 2: Post-trade market risk and surveillance
• Webinar 3: The intersection of pre- and post-trade risk