A World Without FIX
By Tim Healy, Global Marketing and Communications Director, FIX Trading Community
The FIX Protocol has transformed trading by increasing speed, reducing errors and improving efficiency. It also brings market participants together within a ruthless industry.
As someone of a certain age, I can indeed remember a world without FIX. I can remember quite clearly receiving faxes from clients with lists of orders and having to decipher what they said, calling back the client to confirm the details and then the small matter of trading them. I can also remember trading a new issue on the day of issuance and having multiple tickets spread across my desk and trying to allocate shares and price traded across multiple accounts. That was a late night!
I remember the errors – you never tend to forget those. That gut wrenching moment when you realised you had misheard the client and their ticker comment, and had traded something completely different. You see, a world before FIX was not easy. Phone and fax were the means of communication with the odd telex thrown in for good measure.
So, it is with these memories that I and many others can say with great confidence that FIX really has transformed and revolutionised the way the world trades. FIX’s origins lie in an attempt to solve all these pitfalls from the past. Fidelity and Salomon Brothers wanted to communicate orders and executions to each other electronically to reduce errors. Out of this initial conversation spawned the FIX Protocol, which then expanded as both parties realised the potential benefits of using the same protocol with other clients and counterparties.
Global reach of FIX
That was 25 years ago and the use of FIX is now widespread across all market participants and across multiple asset classes. Statistics are difficult to come by. FIX Protocol is open-source which effectively means that anyone can use it and there is no centralised database of FIX usage. However, looking at stock exchange data, and making some assumptions, over $8 trillion in value is traded on a monthly basis on global stock exchanges. A vast majority of this would be transmitted using FIX.
Imagining a life without FIX is not just a simple case of going back to the days of voice trading and broking. It would be safe to say that even without FIX, there is a high probability that other messaging languages would have been developed and used by market participants. This brings me on to another scenario of a world without FIX. What if there were multiple messaging protocols, all competing with each other? What if they were split geographically?
One of the most important facets of the FIX Protocol is its widespread use, both geographically and by asset class. The protocol is owned by the members of the FIX Trading Community. Any changes to the protocol are reviewed and approved by a technical committee and made available for all market participants.
The benefits to market participants are plain to see in the same way that both Fidelity and Salomon Brothers saw them 25 years ago. One protocol available to all enabling the world to communicate in a very cost efficient manner.
Collaboration in a competitive world
If FIX is at the heart of trading, the FIX Trading Community is as important to the market. The FIX Trading Community is the non-profit, industry-driven standards body at the heart of global financial trading. The Community owns the FIX Protocol in trust, which effectively means all initiatives are pursued in response to market participant requests.
This work is organised through a global network of committees, subcommittees and working groups that attract colleagues, peers and competitors who work together in a collaborative manner, free from commercial conflict, and in a way rarely witnessed in the capital markets to address core industry challenges. In a world where competitive advantage is key, FIX brings market participants together. Why? Because the cost efficiencies are clear.
MiFID II working groups
A great example of the collaborative nature of the Community has been the work the members have done to address Markets in Financial Instruments Directive (MiFID) II and the added regulatory requirements. Initially, the efforts focused on specific regulatory technical standards where it was felt that the use of FIX and standards could help market participants. A number of MiFID working groups were formed, calls for participation were made and co-chairs put in place.
One thing to note is that FIX Trading Community is an inclusive organisation. By that I mean that buy-side, sell-side, exchanges/venues, vendors and consultants are all welcome to join and be involved. The work on MiFID has been ongoing for over two-and-a-half years now and we have seen a number of best practices and guidelines documents and extensions to the FIX Protocol released in that time. Regulators and market participants alike recognise that the use of standards has never been more relevant.
FIX Trading Community continues to operate due to members and their annual membership fees as well as the global educational events that are held each year. If you are using FIX and are not a member, we urge you to find out more and join the effort. Without FIX, the world of trading would be a very different place.
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