By Tim Healy, Global Marketing and Communications Manager, FIX Trading Community
The FIX Trading Community’s Working Groups and Committees have had a busy Q1, continuing the work they have been doing in 2013. A number of existing initiatives continue to be worked on whilst new ones have been kicked off. Addressing new regulation is still very much a focus for the groups, however, a number of initiatives are also concentrating on the streamlining of various different processes involved within the pre-trade, at-trade and post-trade work flows. Below is a brief summary of some of the highlights of the work the Community is focusing on.
Global Technical Committee
The Committee has been focused on the next generation of the FIX Protocol. This release will be more than just an update to previous versions of the Protocol but is the final framework that will allow combinations of all supported FIX standards and versions. The vision for FIX 6 is that FIX 6 engines will be able to natively talk FIX 4.2, FIX 4.4, FIX 5.0 SP2 with those counterparties that have not upgraded yet and talk FIX 6 with those that have. The Global Technical leadership is currently brainstorming how best to take this work forward.
TCA Working Group
At the beginning of the year, the TCA Working Group completed the Best Practice guidelines for TCA for Cash Equities. Since then the co-chairs have reached out to the FIX Community for volunteers to expand the document for Currencies, Futures and Options and Fixed Income. There has been an excellent response from the Community and three new sub committees will soon be formed. Additionally, the Group would like to encourage widespread adoption of the guidelines and is talking internally on the best way to do this and will propose a mechanism for self-certification.
OTC Products Committee
In the Fixed Income space, the current initiative is to introduce ITCH semantics into FIX. As some of the more liquid fixed income markets start to exhibit characteristics suitable for HFT, there has been a demand to incorporate some of the features of other established industry protocols into FIX. Therefore, we are working on creating a set of extensions to FIX that bring the best elements of the ITCH protocol into FIX. The work is focused on fixed income venues, but will be applicable beyond Fixed Income.
In Foreign Exchange, there are discussions with the industry to create best practices for the exchange of counterparty credit limit information on inter-dealer FX venues such as EBS and Reuters. The idea is to enable automated kill-switches from FX risk/trading platforms to inter-dealer venues, allow integration of internal credit/risk platforms with inter-dealer venues and, ultimately, lower risk and increase controls around counter-party exposure management for FX.
High Performance Working Group
The High Performance Working Group is looking at adding high performance capability to FIX. The approach is to look at different aspects: new binary encodings to minimize message size and latency, new session layer focused on high performance requirements, application layer updates to minimize semantic verbosity. So far, a few application layer enhancements have been approved through the Global Technical Committee, three different binary encodings are available for public review (draft standard for ASN.1 encoding, second iteration for Google Protocol Buffer and Simple Binary Encoding) and the first iteration of a session layer proposal is being finalized within the working group.
Post Trade Working Group
Having successfully updated and reissued the guidelines for Equities in 2013, it is clear from many industry participants that FIX is now the cornerstone for a rapidly increasing volume of post trade workflow. It is the preferred model of many buy-side firms to adopt a workflow that connects them directly to their brokers. With this capability now available, some buy-sides are now processing more than 50% of their equity trades using FIX. Members of the working group now seek the opportunity to expand the usage across other buy-side firms and across other areas of their businesses, and subgroups of the working group are now working on documenting and agreeing the standards for four other asset classes including Fixed Income, Derivatives, Equity Swaps and FX.
Market Model Typology (MMT) Working Group
The Market Model Typology (MMT) initiative aims at standardizing the content of individual trade messages across equity markets in Europe. This means making sure that trades of similar nature get flagged the same way irrespective of who is the data producer (trading and reporting venues).
MMT Technical Committee (TC) members are in charge of maintaining the MMT data model that is designed to cover all trade types in Europe. Clear and unambiguous definitions are documented for all trade types to allow industrywide consistent implementation. In addition, MMT TC members produce comprehensive tables mapping existing proprietary data feed logic against the new MMT standard.
Some coordination work is performed as well in order to support the implementation of MMT codes in native data feeds operated by trading venues and their subsequent downstream integration in feed and display products operated by vendors.
Global Buy Side Working Groups
Toward the end of last year, the distinct regional (Asia Pac, EMEA and US) working groups combined to form the Global Buy-Side Committee as many of the themes discussed regionally had global implications. As an example, the Execution Venue Initiative comprises a number of aspects including capturing order routing data and a review of the existing best practices documentation with a focus on Tags 29, 30 and 851. The Committee has been working with global exchanges to discuss the addition of test symbology to the environments. US Regulators have also shown interest in the concept of a production test symbol to mitigate risk when new code or processes are introduced. Additionally, there is an initiative to achieve better transparency/risk management of the IPO process. There has been much interest generated as of late to standardize Fixed Income FIX messaging and there is an on-going review process to see where the main issues lie with a focus on the Buy Side work flow. Finally, given the increased focus on the Buy Side regulations in the electronic trading pace there have been discussions about creating a Buy Side Regulatory sub Committee.
All of the groups offer a neutral industry forum encouraging open discussion and participation from all member firm representatives. If you would like to know more or are keen to get involved, please feel free to e-mail us at firstname.lastname@example.org.