In its latest series of Executive Interviews, Forex Magnates’ reporters have reached out to the FIX Trading Community, which has successfully managed to establish itself as an industry standard for OTC Derivatives trading on Swap Execution Facilities (SEFs). We interviewed Sassan Danesh, who is Co-Chair of the FIX Trading Community Global Fixed Income Subcommittee and Managing Partner at Etrading Software, who shared his expertise on SEFs and FIX Trading Community’s Global Marketing and Communications Manager, Tim Healy, who explained what the FIX Trading Community is about.
Let’s start with a general question – explain to our readers what the FIX Trading Community is in a nutshell?
TH- We’re an industry driven standards body and a non-profit organization. Our mandate is to gather together a number of different members of the trading community – vendors, buy-side, sell-side, exchanges, consultants. These members then form different working groups – equities, OTC derivatives, foreign exchange, futures, etc. The working groups address business needs – for example, regulation or ongoing market developments, trying to determine how best to meet the requirements of the market.
How many working groups do you currently have?
TH- We have somewhere in the region of 40 to 50 active working groups and committees. The work is done on a voluntary basis by the members. We currently have about 270 different members covering all kinds of different markets and activities. We have a global reach with representatives from the US, EMEA and Asia-Pacific as well.
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How did FIX become involved with the Swap Execution Facilities (SEFs) initially?
SD- When Dodd-Frank first started to be discussed in 2010, there was a key concern that lots of SEFs would start up and fragment the liquidity which had existed until that point in the “voice markets”, where the buy-side would effectively pick up the phone and call a handful of major swap dealers.
As the market went electronic after the implementation of Dodd-Frank through the use of SEFs, we looked at the feasibility of creating a global standard for the electronic trading of swaps, which could then be leveraged by the SEFs.
What were the main benefits to the SEFs who got on board with the FIX Trading Community?
SD- The benefits were two-fold – first, from a SEF perspective, a standard would mean for them that it would be much easier to bring together all of the liquidity providers and liquidity takers. All one needs now to be able to connect to us, is a technology which covers the FIX standard.
The other aspect is from a dealer or buy-side perspective. One of the key challenges with the introduction of new regulations was which SEFs would end up gaining traction and gaining the liquidity. With such a big market structure change, what usually happens is that there is an increase, in fact an explosion of new trading venues. Over time the market consolidates into a few venues which actually manage to have the right business models to succeed to attract liquidity flows there. So we thought that the use of a standard such as FIX would be a center, around which the industry could coalesce. So from both the buy-side and the sell-side perspectives, what’s most important is to be easily able to connect to whichever SEFs look to be gaining traction.