FIXing Russia – Despite some movement, the world’s largest country is far from being FIX-friendly
By Artem Kozyrev
While FIX is no longer a completely foreign language in Moscow, its adoption has been slow and patchy and interest remains low. Devexperts LLC, a leading financial software developer in Russia, argues that more needs to be done to promote the protocol to encourage foreign investors to access its markets.
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.