# IFR K-DTF Formula: Principal Flow & RTS 2022/26 Stress Rules

> Calculate EU IFR Article 33 Daily Trading Flow (K-DTF) at 0.10% cash and 0.01% derivatives plus RTS (EU) 2022/26 volatility adjustments.

Canonical: https://eurofirmledger.com/bulletins/ifr-k-dtf-daily-trading-flow-principal-execution-stress-scalar
Last updated: 2026-11-14T19:49:03.401Z

**Publication:** Euro Firm Ledger
**Category:** EU Ifr Ifd Class2 Kfactor Prudential
**Published:** 2026-11-14T06:15:25.915Z
**Author:** Lukas Lindqvist, CEFA (Certified European Financial Analyst (EFFAS/CEFA, Frankfurt & Zurich))
**Reviewer:** Not recorded

## Answer-first summary

IFR Article 33 charges 0.10% on principal cash trades and 0.01% on derivative notional under K-DTF, while RTS (EU) 2022/26 scales those coefficients downward during extreme exchange-wide volatility spikes.

## Key takeaways

- IFR Article 33 charges K-DTF at 0.10% of average daily principal cash-trade value and 0.01% of principal derivative notional over a 9-month rolling window excluding the last 3 months.
- Unlike K-TCD, centrally cleared exchange trades on Eurex, Xetra, and Euronext DO count in full toward K-DTF because operational fat-finger execution errors affect cleared venues immediately.
- Under RTS (EU) 2022/26, trades executed during trading-venue-declared MiFID RTS 7 stressed market conditions are effectively excluded via a proportional downward scalar adjustment.
- Back-to-back principal STP brokers record both the client-facing principal trade and the offsetting LP hedge trade inside DTF, doubling daily notional relative to pure agency K-COH.

## Related financial entities

- **Dutch Authority for the Financial Markets (AFM) RTS 6 Framework** (AFM-RTS6) — license: Independent regulatory body supervising the operation of financial markets, algorithmic market makers, and conduct of business in the Netherlands.
- **EMIR 3.0 Active Account Framework (Eurex CCP)** (EMIR-AAR) — product: EU regulatory framework mandating that in-scope financial counterparties hold operational and actively utilized clearing accounts at EU-authorized central counterparties.
- **German Investment Institutions Act (WpIG / BaFin)** (BAFIN-WPIG) — license: Specialized German regulatory statute transposing the EU Investment Firms Directive (IFD), administered by BaFin and the Deutsche Bundesbank.

## Analysis

Algorithmic liquidity providers, Systematic Internalisers, and matched-principal brokers execute billions of euros of intraday turnover while ending the trading day nearly flat—meaning end-of-day balance-sheet metrics alone would miss the catastrophic operational risk of a fat-finger loop or runaway quote engine (such as the classic Knight Capital event). **Article 33 of Regulation (EU) 2019/2033 (IFR)** plugs that gap via **Daily Trading Flow (K-DTF)** inside Risk-to-Firm (RtF): charging **0.10% (10 bps)** of average daily principal cash-trade value and **0.01% (1 bp)** of average daily principal derivative notional, tempered by an innovative anti-procyclicality valve in **Commission Delegated Regulation (EU) 2022/26** that *reduces* K-DTF coefficients during extreme market-wide volatility so market makers do not pull quotes when European bourses need liquidity most!

Within our [EU IFR/IFD prudential capital guide](/bulletins/eu-ifr-ifd-class-1-2-3-prudential-capital-k-factor-guide-2026) and the [IFR/IFD prudential hub](/topics/eu-ifr-ifd-class2-kfactor-prudential), K-DTF directly shapes the economics of Amsterdam HFT desks under the [AFM RTS 6 algorithmic framework](/passports/afm-rts-6-algorithmic-framework) as well as principal CFD and prime-brokerage venues like [B2Prime](/firms/b2prime), [Colmex Pro](/firms/colmex-pro), and [CAPEX.com](/firms/capex).

## Scope Boundary: K-DTF (Principal / Own Name) vs K-COH (Pure Agency)

Under **IFR Articles 4(1)(33) and 33**, K-DTF captures two categories of trades measured across each business day over the preceding **9 months, excluding the 3 most recent months** (a 6-month lagged daily average):
1. **Dealing on Own Account (Annex I Section A3)**: Every proprietary buy/sell fill, market-making quote hit, B-book client CFD trade, and A-book LP hedge leg executed for the firm's own book; AND
2. **Client Orders Executed in the Firm's Own Name**: Riskless matched-principal fills or commissionaire agency trades where the investment firm steps onto the exchange ticket in its own legal name (which IFR Article 20(2) simultaneously removes from [K-COH](/bulletins/ifr-rtc-k-aum-k-cmh-k-asa-k-coh-client-risk-coefficients) to prevent double charging).

![Anti-procyclical K-DTF coefficient adjustment mechanism under IFR Article 33(4) and Commission Delegated Regulation (EU) 2022/26](/api/figure?type=flow&title=IFR%20Art.%2033%20%26%20RTS%202022%2F26%20Stressed-Market%20K-DTF%20Valve&subtitle=How%20EU%20trading-venue%20extreme%20volatility%20declarations%20scale%20down%20K-DTF%20so%20HFTs%20keep%20quoting&steps=1.%20Daily%20Trade%20Log%3A%3ASum%20cash%20market%20value%20%26%20duration-adj%20deriv%20notional%7C2.%206-Mo%20Lagged%20Mean%3A%3AAverage%20daily%20flow%20over%20months%20%5Bt-8%20..%20t-3%5D%7C3.%20RTS%202022%2F26%20Check%3A%3AIdentify%20hours%20flagged%20as%20stressed%20market%20conditions%7C4.%20Adjusted%20Scalar%3A%3AScale%20down%200.10%25%20%2F%200.01%25%20in%20proportion%20to%20stressed%20volume&metrics=CASH%20DTF%20SCALAR%3A%3A0.10%25%20%2810%20bps%29%3A%3ANormal%20market%20daily%20average%7CDERIV%20DTF%20SCALAR%3A%3A0.01%25%20%281%20bp%29%3A%3AInterest-rate%20duration%20adjusted%7CROLLING%20WINDOW%3A%3A6%20Mos%20%28Lag%203%29%3A%3A9-month%20window%20excl.%20last%203%20mos%7CQCCP%20%2F%20OTC%20SCOPE%3A%3ABoth%20Included%3A%3AUnlike%20K-TCD%2C%20cleared%20trades%20count!)

## Contrast Table: How Trade Structures Map Across K-COH, K-DTF, K-NPR & K-TCD

| Execution / Booking Model | Enters K-COH? | Enters K-DTF? | Enters K-NPR / K-CMG? | Enters K-TCD? |
| :--- | :--- | :--- | :--- | :--- |
| **Pure Agency RTO / Disclosed Client Name** | **Yes** (0.10% / 0.01%) | No | No | No |
| **Matched-Principal / Undisclosed Own-Name Agency** | No (excluded by Art. 20(2)) | **Yes (Both Legs / Client Flow)** | EUR 0 EOD net delta | Yes (if OTC non-cleared) |
| **Unhedged Internal B-Book Retail CFD** | No | **Yes (1x Client Fill)** | **Yes (Full Net K-NPR)** | Yes (residual client EV) |
| **100% Back-to-Back A-Book Principal CFD + LP Hedge** | No | **Yes (Client Leg + LP Hedge Leg!)** | EUR 0 EOD net delta | **Yes (LP + Client EV)** |
| **Eurex / Euronext HFT Options Market Making** | No | **Yes (Every Exchange Fill)** | **Yes (K-CMG or K-NPR)** | No (QCCP exempt Art. 25(2)) |

## Anti-Procyclical Stress Scalar Math in Delegated Regulation (EU) 2022/26

During March 2020 COVID-19 or sovereign energy-shock sessions, daily exchange volumes triple precisely when spreads widen. If K-DTF applied a rigid 0.10% / 0.01% scalar to crisis-inflated volumes, market makers would suffer punitive Pillar 1 capital spikes three months later—incentivizing them to switch off quoting engines during crashes. To prevent liquidity evaporation, **IFR Article 33(3)–(4) and RTS (EU) 2022/26** adjust the K-DTF coefficient (C_adj) downward whenever EU trading venues declare **"stressed market conditions"** under MiFID II RTS 7 (Commission Delegated Regulation (EU) 2017/578 Article 6(2))!

```formula
Adjusted_K_DTF_Requirement_Under_RTS_2022_26:
 K_DTF_EUR = (C_cash_adj * DTF_cash_daily_avg) + (C_deriv_adj * DTF_deriv_daily_avg)

 C_cash_adj = 0.0010 * (DTF_excl_stress_cash / DTF_total_cash)
 C_deriv_adj = 0.0001 * (DTF_excl_stress_deriv / DTF_total_deriv)

 Note: Substituting C_adj * DTF_total algebraically simplifies to applying the standard
 0.10% / 0.01% scalar strictly to non-stressed flow (excluding RTS 7 stressed windows)
 normalized across total business days in the [t-8 .. t-3] window!

Worked Amsterdam Cash-Equity & EURO STOXX Futures Principal Desk:
 Observation Window: 126 trading days across months [t-8 .. t-3]
 Total Principal Cash Equity Turnover = EUR 37,800,000,000 -> DTF_total_cash = EUR 300,000,000 / day
 Of which EUR 5,040,000,000 executed inside Euronext/Xetra RTS 7 Stressed Market Condition windows
 -> DTF_excl_stress_cash = (37.80B - 5.04B) / 126 = EUR 260,000,000 / day
 -> C_cash_adj = 0.0010 * (260M / 300M) = 0.08667% -> Cash K_DTF = EUR 260,000
 Duration-Adjusted Futures Notional (excl. stress) = EUR 4,200,000,000 / day -> Deriv K_DTF = EUR 420,000
 Total Adjusted K_DTF_EUR = 260,000 + 420,000 = EUR 680,000 (saving EUR 40,000 on cash stress quotes)
```

![Impact of back-to-back A-book hedging leg double-fill volume and RTS 2022/26 stress exclusions on IFR Article 33 K-DTF capital](/api/figure?type=bars&title=K-DTF%20Drivers%3A%20A-Book%20Double-Legging%20vs%20RTS%202022%2F26%20Relief&subtitle=Comparing%20cash%20vs%20derivative%20K-DTF%20charges%20and%20stressed-window%20exclusions&steps=Unadjusted%20Cash%20DTF%3A%3AEUR%20300k%20at%200.10%25%20on%20EUR%20300M%2Fday%20flow%7CRTS%202022%2F26%20Cash%20Adj%3A%3AEUR%20260k%20after%20excluding%20RTS%207%20stressed%20hours%7CDerivatives%20DTF%3A%3AEUR%20420k%20at%200.01%25%20on%20EUR%204.2B%2Fday%20futures%7CA-Book%20Hedge%20Alert%3A%3ABoth%20client%20CFD%20fill%20%2B%20LP%20hedge%20fill%20enter%20DTF!&metrics=CASH%20VS%20DERIV%20RATIO%3A%3A10%20%3A%201%20Scalar%3A%3A10%20bps%20cash%20vs%201%20bp%20derivatives%7CSTRESS%20TRIGGER%3A%3AMiFID%20RTS%207%3A%3AReg.%202017%2F578%20Art.%206%282%29%20venue%20flag%7CSFT%20REPO%20EXCLUSION%3A%3AExcluded%3A%3ARTS%202022%2F25%20excludes%20financing%20repos%7CIR%20DURATION%20RULE%3A%3AMaturity%20%2F%2010%3A%3AIFR%20Art.%2033%282%29%20interest-rate%20derivs)

## Worked Amsterdam Principal Cash & Futures Desk Stress Relief

Excluding venue-flagged stressed trading windows prevents crisis market-making from inflating subsequent quarterly COREP requirements.

## Double-Legging Trap in Back-to-Back Principal CFD Hedging

Notice a crucial operational detail in **RTS (EU) 2022/25** for principal STP CFD brokers supervised by [CySEC](/competent-authorities/cysec) or [BaFin](/competent-authorities/bafin): when a broker deals as principal against a retail client on EUR 1,000,000 of EUR/USD CFD and simultaneously executes a EUR 1,000,000 offsetting principal hedge leg with an institutional Liquidity Provider, **both principal executions represent own-account trades of the firm**—entering DTF at EUR 2,000,000 daily derivative flow (EUR 200/day K-DTF impact), whereas pure agency RTO ([K-COH](/bulletins/ifr-rtc-k-aum-k-cmh-k-asa-k-coh-client-risk-coefficients)) counts the single EUR 1,000,000 client order once alongside [K-NPR vs K-CMG position risk models](/bulletins/ifr-rtm-k-npr-net-position-risk-vs-k-cmg-clearing-margin-model).

## Frequently asked questions

### How does an algorithmic trading firm prove an hour qualified for the RTS (EU) 2022/26 stressed market discount?

RTS (EU) 2022/26 ties stressed market conditions strictly to official real-time or post-trade notifications published by the relevant EU trading venue under Article 6(2) of Commission Delegated Regulation (EU) 2017/578 (RTS 7)—firms cannot self-declare stress internally on OTC venues.

### Are overnight securities financing transactions (repos and stock borrows) included in K-DTF?

Under RTS (EU) 2022/25 on K-factor measurement methods, financing transactions executed purely for treasury funding or collateral management rather than cash/derivative market trading are excluded from DTF while remaining captured under K-TCD.

### How are options valued for K-DTF—by option premium paid or by underlying strike/delta notional?

Under IFR Article 33(2) and RTS (EU) 2022/25, derivative notional for options uses the delta-equivalent economic notional of the underlying instrument rather than just the small upfront option premium, preventing deep out-of-the-money options from inflating or hiding risk.

### Does exercising or cash-settling an expiring futures contract at maturity count as a second K-DTF trade?

Automated expiry cash settlement by an exchange clearing house without a new order-book execution does not constitute a new daily trading flow transaction; only active execution fills entered into the market count.


## Source URLs

- https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32019R2033
- https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022R0026
- https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022R0025
- https://www.eba.europa.eu/regulation-and-policy/investment-firms

## Citation

- APA: Lukas Lindqvist, CEFA. (2026). IFR Daily Trading Flow (K-DTF): Principal Execution Risk & RTS 2022/26 Stress Scalars. Euro Firm Ledger. https://eurofirmledger.com/bulletins/ifr-k-dtf-daily-trading-flow-principal-execution-stress-scalar
- Canonical article: [IFR Daily Trading Flow (K-DTF): Principal Execution Risk & RTS 2022/26 Stress Scalars](https://eurofirmledger.com/bulletins/ifr-k-dtf-daily-trading-flow-principal-execution-stress-scalar)
- Site research index: [Euro Firm Ledger](https://eurofirmledger.com/llms-full.txt)