Financial Information Exchange - Expansion of Messaging into the Post Trade Space
Long-established bilateral communications network FIX Protocol are expanding their service into the post-trade arena, supporting Straight-Through Processing (STP) from Indication of Interest (IOI) to allocations and confirmations.
The significant adoption of FIX within the financial services community was empirically highlighted by the FIX Global Survey which was conducted by TowerGroup in 2005. The results cited that 75% of Buy-Side Buy-Side The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim Read this Term and 80% of sell-side firms interviewed currently use FIX for electronic trading, and that both groups planned to focus substantial efforts on expanding their FIX usage to over 93%, as well as leveraging FIX across additional asset classes by 2008. The survey also revealed that FIX is developing a key role within the post trade space, as over 80% of buy-side firms, and over 95% of sell-side firms surveyed currently support, or plan to support FIX for allocations. This demonstrated the demand for FIX Protocol to investigate and develop a set of industry guidelines relating to the post-trade sector.
FIX Protocol was initially established in 1992 as a communications framework for equity trading between Fidelity Investments and Salomon Brothers, concentrating primarily on pre-trade and trade communication on an international basis.
As a non-profit organization, FIX Protocol host periodical events aimed at defining, managing and promoting increased usage of FIX, an acronym for Financial Information Exchange, as an enabler for electronic trading. Stacy Osborne, Events Manager at FIX Protocol explains that: "Each event, held several times per year, is designed to address the issues, challenges and opportunities impacting the global trading community."
FIX Protocol is open source, and free of charge. The organizations which use FIX are only exposed to the cost of planning, network services and connectivity in order to integrate it within their infrastructure.
To discuss the expansion into the post-trade space, Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates spoke to Courtney McGuinn, Fix Protocol's Operation Director.
What factors and demand led to the development of a post-trade service?
It actually wasn’t a post-trade service that FIX Protocol developed but a set of industry guidelines to encourage the adoption of FIX for post-trade processing between buy-sides and sell-sides that can be used bi-laterally as well as through intermediary facilities. As a result, a number of members of the FPL community are developing post-trade services and leveraging the best practices that have been developed. A link to these guidelines that were disseminated last year can be found here: https://www.fixprotocol.org/documents/6423/EquityAllocationsViaFIX-Guidelines-FIX%2042-44-v1.1.pdf. An updated version of this is due to be released over the next month or so.
The main factors that lead to the development of these guidelines include:
1) Increased Availability
Direct communication between buy-side and sell-side
2) Increased automation and processing speed – straight-through-processing
Substantially reduced out-of-band communication delay and cost
3) Increased Accuracy, Traceability, and Footing – straight-through-processing
Traceable id-based linkage through complete trade/post-trade cycle of messages
Electronic communication of: A) Explicit cancellations, B) Computed fields to reduce computational differences (e.g. net money) and C:All pertinent data (e.g. accrued interest)
Precision and tolerance specified at configuration time
4) Reduced Cost
Utilizes existing FIX infrastructure
Reduced intermediary fees
Reduced manual intervention
Facilitates Implementation – minimize time and cost
5) Standardization
Detailed industry standard guidelines– everyone implements the same way
6) Phasing Support
Sell-sides can transition from economic matching algorithms and data processing to exact matching using FIX ids and data fields.
Buy-sides can implement functionality in phases by using bilateral FIX for some allocations while still continuing to use traditional means for the rest.
Who will take it up?
Major brokers and buy-sides have been working together to implement the guidelines and a few vendors have been building post-trade services as a result.
As a non profit making organization, has the cost of developing this post-trade service been a challenge as it needs to be tested and rolled out to many members?
As per the above, there was no post-trade service developed by FPL so therefore there has been no cost to the organization. Our members are the ones developing the post trade services.
How will is functionality differ from existing offerings and what will it provide to FIX Protocol's members?
It will be cost effective as it was developed externally by members and therefore does not carry a development cost.
Long-established bilateral communications network FIX Protocol are expanding their service into the post-trade arena, supporting Straight-Through Processing (STP) from Indication of Interest (IOI) to allocations and confirmations.
The significant adoption of FIX within the financial services community was empirically highlighted by the FIX Global Survey which was conducted by TowerGroup in 2005. The results cited that 75% of Buy-Side Buy-Side The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim Read this Term and 80% of sell-side firms interviewed currently use FIX for electronic trading, and that both groups planned to focus substantial efforts on expanding their FIX usage to over 93%, as well as leveraging FIX across additional asset classes by 2008. The survey also revealed that FIX is developing a key role within the post trade space, as over 80% of buy-side firms, and over 95% of sell-side firms surveyed currently support, or plan to support FIX for allocations. This demonstrated the demand for FIX Protocol to investigate and develop a set of industry guidelines relating to the post-trade sector.
FIX Protocol was initially established in 1992 as a communications framework for equity trading between Fidelity Investments and Salomon Brothers, concentrating primarily on pre-trade and trade communication on an international basis.
As a non-profit organization, FIX Protocol host periodical events aimed at defining, managing and promoting increased usage of FIX, an acronym for Financial Information Exchange, as an enabler for electronic trading. Stacy Osborne, Events Manager at FIX Protocol explains that: "Each event, held several times per year, is designed to address the issues, challenges and opportunities impacting the global trading community."
FIX Protocol is open source, and free of charge. The organizations which use FIX are only exposed to the cost of planning, network services and connectivity in order to integrate it within their infrastructure.
To discuss the expansion into the post-trade space, Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates spoke to Courtney McGuinn, Fix Protocol's Operation Director.
What factors and demand led to the development of a post-trade service?
It actually wasn’t a post-trade service that FIX Protocol developed but a set of industry guidelines to encourage the adoption of FIX for post-trade processing between buy-sides and sell-sides that can be used bi-laterally as well as through intermediary facilities. As a result, a number of members of the FPL community are developing post-trade services and leveraging the best practices that have been developed. A link to these guidelines that were disseminated last year can be found here: https://www.fixprotocol.org/documents/6423/EquityAllocationsViaFIX-Guidelines-FIX%2042-44-v1.1.pdf. An updated version of this is due to be released over the next month or so.
The main factors that lead to the development of these guidelines include:
1) Increased Availability
Direct communication between buy-side and sell-side
2) Increased automation and processing speed – straight-through-processing
Substantially reduced out-of-band communication delay and cost
3) Increased Accuracy, Traceability, and Footing – straight-through-processing
Traceable id-based linkage through complete trade/post-trade cycle of messages
Electronic communication of: A) Explicit cancellations, B) Computed fields to reduce computational differences (e.g. net money) and C:All pertinent data (e.g. accrued interest)
Precision and tolerance specified at configuration time
4) Reduced Cost
Utilizes existing FIX infrastructure
Reduced intermediary fees
Reduced manual intervention
Facilitates Implementation – minimize time and cost
5) Standardization
Detailed industry standard guidelines– everyone implements the same way
6) Phasing Support
Sell-sides can transition from economic matching algorithms and data processing to exact matching using FIX ids and data fields.
Buy-sides can implement functionality in phases by using bilateral FIX for some allocations while still continuing to use traditional means for the rest.
Who will take it up?
Major brokers and buy-sides have been working together to implement the guidelines and a few vendors have been building post-trade services as a result.
As a non profit making organization, has the cost of developing this post-trade service been a challenge as it needs to be tested and rolled out to many members?
As per the above, there was no post-trade service developed by FPL so therefore there has been no cost to the organization. Our members are the ones developing the post trade services.
How will is functionality differ from existing offerings and what will it provide to FIX Protocol's members?
It will be cost effective as it was developed externally by members and therefore does not carry a development cost.