By Artem Kozyrev
In Russia, the major market players, including the largest brokers and the country’s two main exchanges, the Russian Trading System (RTS) and Moscow Interbank Currency Exchange (MICEX), have already integrated via their own APIs built on SQL and C technologies. As these institutions have already achieved a certain degree of success using these established integration models, many question the value of an upgrade to a full FIX infrastructure.
Russian brokerage companies, in most cases, perform electronic trading via the QUIK trading platforms developed by ARQA Technologies. Apart from custom APIs, QUIK solutions also provide access to the main Russian, and a number of foreign, exchanges indirectly, via a FIX connection through QUIK network. This has tied Russian brokers to their software provider, and makes the whole industry unreceptive and reluctant to any interventions of new technologies into the market.
Still, in spite of these obstacles, the industry is slowly changing as the brokers and exchanges become aware of the business opportunities offered by FIX. Despite their own established APIs, it has been the exchanges that are leading the shift. This change of heart, it seems, is being driven by the growing level of interest in trading opportunities in Russia from international brokers outside the country. According to a recent Morgan Stanley report, the share of foreign traders on the domestic exchanges now exceeds 30 percent, and continues to rise.
As Roman Goryunov, president of the RTS recently acknowledged, “Today, international banks and brokerage firms are increasingly interested in our derivatives markets, so it is essential that Russia’s major brokers and RTS have the effective and powerful solutions capable to support international trade standards.”
Most believe that the level of participation in the Russian markets would have been even higher had the exchanges provided foreign investors with a standardised FIX access earlier. Instead, foreign investors have had to either open local offices and connect via the exchange’s’ custom-made APIs, or apply to a Russian broker for access via its QUIK trading platform. Neither models were conducive with encouraging greater international participation in the domestic markets.
According to local FIX specialists, the time and cost involved in upgrading to FIX is far shorter than trying to adapt to the local systems. “The difference between R&D expenses for integration via FIX or non-FIX protocols is substantial. Where it takes three to four days to build FIX integration, to adopt the route of trading via the custom APIs can take up to three months and be much more expensive,” explains Artem Kozyrev, Product Development Manager of Devexperts LLC.
It was these market realities that have driven RTS and MICEX to improve their FIX infrastructure and to build a direct connection to their services for foreign investors, using FIX.
Rolling out FIX across the exchanges
RTS looked to develop FIX and FASTenabled gateways consistent with those of leading international exchanges, such as CME, NASDAQ and NYSE. The aim of the exchange was simple: to encourage greater participation by international brokers by offering direct exchange access via the FIX, and delivering exchange quotes to subscribers via FAST Protocol.
Commenting on the implementation, Goryunov said: “RTS is committed to the development of a securities and derivatives market that will facilitate effective market control for the majority of the participants. We certainly assume that FIX connectivity will increase access to RTS, especially by international brokerage companies.”
The result is that, today, FIX and FAST gateways successfully run on FORTSRTS derivatives market and on RTS Classica market. The solution that our firm developed for the exchange, has been widely acknowledged as a step forward, and has already delivered tangible results. A number of domestic and international firms are building long-term relationships with the exchange using the FIX and FAST gateways.
For MICEX, a gateway based on FIX technologies was also developed and is currently under testing to ensure direct order processing, via the exchange’s trading system, for both local and international market players. MICEX is also developing the application to process MICEX’s market data to its subscribers.
“The launch of FIX gateways to both RTS and MICEX was a significant step forward for the entire financial industry in Russia, and one which we believe will herald a strong expansion in electronic trading, as our markets become more accessible for start-ups and international companies,” explains Kozyrev.
Brokers follow suit
Equally, interest is growing among Russia’s domestic brokers as they turn their attention to trading opportunities on the global stage. Some are considering using trading platforms offered by foreign developers to allow them to integrate into the trading platforms of international exchanges and brokerages. This demand is generating a spike in the interest in software and education programmes on FIX-based trading solutions.
And the technology vendors
Another way for FIX technologies to break into Russian is through technology firms providing automated and semiautomated trading systems to the local trading community.
At a recent MICEX-organised conference, Grigory Baytsur from the department of Trading System Development, told delegates that, “in spite of the decrease of trade volumes caused by the recent bear market and general economic recession, technological activity of market participants has been growing steadily. In February 2009, the daily volume of trades processed to MICEX Stock Exchange reached 600,000 orders per day and 400 orders per second. The research shows that about 30% of all orders executed by MICEX trading system are provided by ATS’.”
Automated Trading Systems (ATS) are usually sensitive to the API of trading platforms when connecting with them, and a developer has to either adjust or completely rebuild the automated system each time he wants to integrate with a new trading platform (broker or exchange) or with a new API implementation of these counterparties. The further expansion of FIX technologies would simplify the development process of ATS’, considerably enlarge their service life, and facilitate trade in Russia.
Still a way to go …
However, despite a relative thaw towards FIX technologies and the growing awareness of its benefits, the protocol remains a complementary method for electronic trading in Russia, not the trading language of choice. The majority of brokerage firms and some exchanges show little interest in FIX and prefer to stick with long-standing business models. In most cases, this stagnation is a direct result of a lack of information about FIX technologies within the context of the Russian financial community.
In these conditions, both exchanges – RTS and MICEX – still have a way to go to achieve a uniform FIX infrastructure in Russia. MICEX, despite having implemented the FIX gateway, appears to have done too little to further promote the service. As for RTS, it seems to be putting its efforts into making the FAST Protocol a standard for market data processing in Russia. But still, little has been done by RTS to promote FIX as a standard for electronic trading.
Together these circumstances make the future of FIX technologies in Russia not as clear as we would like it to be. An effective promotion of FIX technologies is needed both on the part of Russian exchanges, ITcompanies and the FIX Protocol organisation to influence the market dynamics and the development of FIX technologies in Russia.
By Artem Kozyrev