Hanno Klein, Senior Vice President Deutsche Börse IT, and Co-Chair of the “FIX Protocol Global Technical Committee”, discusses Eurex Group’s commitment to supporting the global industry standards in its newest interface portfolio.
Like a growing number of market participants, Eurex Group recognises that using the industry standard FIX and FIXML protocols delivers a number of innovative business benefits for exchange and clearing house users as well as for their operators. This includes increased customisation, hardware independence and flexibility. As the FIX and FIXML protocols continue to increase in relevance throughout the financial industry, their utilisation by Eurex Group for several of its interfaces allows exchange and clearing house users, and software vendors who already utilise FIX and FIXML, to integrate changes and upgrades more rapidly. Additionally, the utilisation reduces complexity and thus leads to increased resource efficiencies.
As a universal language for the financial industry, FIX is not merely a technology and can be used for many different interface types in combination with the appropriate transport. The Transport Independence Framework was introduced by FIX Protocol Limited (FPL) as a key concept of FIX 5.0 to allow any transport technology in addition to the FIX Session Protocol. Eurex Group achieves the highest levels of performance and standardisation by combining the FIX Application Protocol with a proprietary binary transport. FIX Protocol’s High Performance Working Group currently develops multiple standard binary transports that will make proprietary implementations obsolete.
Eurex Group has been an avid supporter of interfaces that utilise FIX. As an early adopter of FIX and the first clearing house to utilise AMQP, the Group features FIX or FIX-based interfaces in a variety of Group companies’ architectures i.e., Eurex Exchange, Eurex Clearing and the International Securities Exchange (ISE) all feature interfaces using FIX or FIXML.
Committed to FIX With the introduction of its new trading architecture, Eurex Group demonstrates its dedication to supporting global standards and has continued its commitment to offering best-in-class FIX interfaces, among others in its interface portfolio, to its customers. Many of the proprietary design principles of Eurex Group’s new trading architecture have been introduced to the FIX Protocol’s High Performance Working Group and we are confident that these can become part of a standard approach for FIX interfaces.
New Trading Architecture Eurex Exchange’s new trading architecture, set to go live in December 2012, will enhance performance across the board. It promises to reduce latency and increase throughput as well as deliver enhanced system flexibility. Connecting to the new trading architecture is possible via a variety of new interfaces. All interfaces have the usage of FIX semantics in common while offering the optimal transport for each interface to fulfill its specific technical requirements related to performance, reliability and ease of access.
At the FIXGlobal Face2Face Forum in Seoul, Korean firms announced the formation of a FIX working group and the Korean Exchange’s intention to build an ultra low latency trading platform.
The opening speaker at the FIXGlobal Face2Face Forum Korea was keenly anticipated by the 200+ delegates, (a quarter of whom were made up of the buy-side and a third the sellside), as he was raising many of the issues that surround the HFT arena, but that are rarely touched on at industry events in Korea. By placing HFT in context , Edgar Perez, author of the recently published “The Speed Traders”, highlighted many of the opportunities and challenges that markets around the world face, in the low latency trading strategies environment. Not least, he pointed out the colossal task facing regulators and associated technology costs, just to monitor high-frequency trading, post trade, let alone real-time.
A recurring theme throughout the day, latency was covered by most of the presentations, especially in the context of FIX. Deutsche Borse’s Hanno Klein, and NYSE Technologies Asia Pacific CEO, Daniel Burgin, stressed that FIX standards are quite at home in the low latency environment, with exchanges around the world already using FIX for their low latency systems. As Mr. Burgin pointed out, “FIX is not slow, but through poor implementation, it can be made slow – and this has happened in various markets”. These comments rang true with the attendees, especially as Mr. Kyung Yoon, Division Head of Financial Investment IT Division of KOSCOM, outlined their plans not only to implement the latest version of FIX at the Korean Exchange, but also that when the new exchange system is rolled out in 2013, that speeds as low as 70 microseconds will be their benchmark. To the ‘icing on the cake’ Mr. Yoon then expressed KOSCOM’s commitment to helping establish a FIX liaison group in Korea that will ensure a highly ‘standard’ implementation of the FIX Protocol.
MC for the day, FIXGlobal’s Edward Mangles, (also FPL Asia PacificRegional Director), welcomed the announcement, stating that he and the FPL Asia Pacific group, looked forward to working more closely with KOSCOM, KRX and the Korean trading community as a whole. With delegates staying put to hear the bi-lingual presentations/discussions throughout the day, (with a few afternoon speakers actually commenting that the crowd in the room was unusually large for the final sessions), the updates on algorithmic trading (Josephine Kim, BAML) and TCA (Ofir Geffin, ITG) provoked a number of follow-up questions and discussions, indicating the delegates’ appetite surrounding these issues.
George Macdonald, CEO of Macdonald Associates (MACD) looks into the history of German exchange platforms and reveals the future of German exchange connectivity through FIX.
Germany was slow on the uptake of FIX. In order to understand that statement, it is necessary to take a look at the past. It was not because they were slow at adopting electronic trading, but in fact, precisely the opposite; the Swiss Exchange (then called SOFFEX) and the German Exchange (then called Deutsche Termin Börse) were right at the forefront of electronic trading with their systems going live at the end of the eighties.
Electronic trading took time to gain significant momentum. In 1996 the BUND (a futures contract on German debt) was still traded almost exclusively in London at LIFFE in open outcry. The fully electronic German exchange, despite having been around for six years, had managed to gain only 30% of market share. Indeed, many people at LIFFE believed that derivative trading could never move off the floor and onto an electronic platform. The move to Frankfurt happened in stages, with intense competition at the end of 1997. However, once 50% was reached, the tipping point had occurred and the volumes migrated entirely in just a few months.
The Germans had demonstrated that electronic trading could work. The cash market for equities was also one of the first to move to a fully electronic platform, with the Deutsche Börse order books going live on Xetra in 1997. Since then, electronic trading has swept the globe, with almost no market resisting the inevitable change. There have also been a lot of other changes since then as the trading process continues to evolve. The early success was also the reason for the slow uptake of FIX; the first mover advantage on electronic trading meant that the exchanges and banks built a trading landscape tightly knitted around a small number of proprietary systems.
Ultimately, two main connections to liquidity evolved: Xetra, a proprietary trading platform developed by the Frankfurt exchange, and XONTRO, a system which connected the banks to the regional exchanges (Stuttgart, Düsseldorf, Hamburg, München, Hannover, Berlin and the Frankfurt floor). These two systems ensured that the trading landscape became intertwined and dependent on the existing infrastructure. There was no pressing need for a change. This, in turn, made it very difficult for new entrants such as Equiduct, NASDAQ Europe and Chi-X to gain a foothold. The move to FIX was something inevitable, however, and it was only a question of when, not if, the connectivity changed.
Gradually, some new exchanges did experience success. For example Tradegate, a new startup exchange based in Berlin, has recently been successful in capturing flow, using FIX as their main method of connectivity. Thorsten Commichau of Tradegate said: “FIX is basic technology that makes sure your order stream doesn’t dry up. We at Tradegate have been providing it since 2001 and recently an increasing number of other German exchanges have started to use it too. Tradegate’s FIX interface supports modern order types such as one-cancels-other and trailing-stop limit and has made proprietary access alternatives unnecessary. In 2010, Tradegate Exchange recorded 3.2 million trades, a growth of 33 percent compared with 2009. Nowadays, over 80 percent of all customers send their orders to Tradegate Exchange in the FIX format.”