Exponential Growth in Electronic Bond Trading Prompts Publication of Guidelines

FIX Protocol Ltd publishes guidelines to advance trading practices in response to exponential growth in electronic bond trading

Non-profit industry standards organisation FIX Protocol has published recommended best practices and accompanying implementation guidelines for the electronic trading of bonds. These recommendations will enable bond market participants to benefit from cost effective and efficient connectivity to the growing number of bond trading platforms emerging across the U.S. and European markets.

Regulatory efforts to increase capital requirements and enhance transparency, in this traditionally voice traded asset class, have led to market structure changes which are creating an increasingly automated and venue-driven trading environment.

The best practices and implementation guidelines provide recommendations to both existing and emerging venues, broker-dealers and Market Makers Market Makers Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Read this Term on how they can use the FIX Protocol to support their platforms. This development complements recommendations released in 2012 to support the trading of Credit Default Swaps (CDS) and Interest Rate Swaps (IRS), which are currently being implemented by a number of Swap Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term Facilities (SEFs).

These guidelines have been produced by market participants keen to encourage the adoption of standards by fixed income trading venues.

Written by industry experts, the recommendations explain how FIX can be implemented in a consistent manner to lower implementation costs and deliver maximum industry-wide benefit, including recommendations for how FIX can be used to support fixed income trading on:

• Markets based on quote negotiation, utilising Request for Quote models

• Quote-driven markets based on streaming executable quotes

• Markets based on central limit order books

Additionally, further functionality has been added to the FIX Protocol to meet emerging needs for bond trading.

These enhancements will ensure that the standard can comprehensively meet all business requirements as effectively as possible.

To access the guidelines please click here: www.fixprotocol.org/documents/7320/GFICCashBondsBusinessSummaryV1_2.pdf

The FIX Protocol has become a reference point in the electronic trading industry which has achieved mass adoption for front-office equities trading and its use is now steadily expanding across the foreign exchange, derivatives and fixed-income markets.

The adoption of FIX by trading venues has risen significantly over recent years. FIX offers market participants reduced integration costs and considerable efficiency gains by connecting firms to trading partners in a standardized and cost‐effective manner, minimizing the financial implications of market entry and increasing choice as switching costs are reduced.

Commenting on this announcement, Sassan Danesh, Co-Chair FPL Global Fixed income Committee, Managing Partner, ETrading Software said, “This initiative is expected to play a significant role in the evolution of bond trading."

"In recent years this market has witnessed massive change and as it becomes increasingly electronic encouraging the use of FIX will be vital to its success. FIX adoption will ensure that an efficient trading environment is created, within which innovation and competition can flourish.”

Commenting on the guidelines, Ric Elvir, Co-Chair of the FPL Global Fixed Income Committee, Credit Trading, UBS stated, “The completion and availability of best practices and implementation guidelines marks a key milestone in the development of FIX for Fixed Income."

"This should dramatically promote industry adoption as they will provide consistent guidance to bond market participants looking to explore the many benefits that standardisation offers. The next stages of this project will help to continue this progress, expanding the use of FIX for other credit based products.”

Fix Protocol are due to attend the EMEA Trading Conference on February 28th in London, where the evolving fixed income market and FPL’s work to support the industry in meeting these advancements will be discussed.