Future of FIX down-under
FIX is here to stay. This was the message that emerged loud and clear at the FPL Australia FIX Conference held in Sydney on 11 March. In a standing-room only arena, approximately 300 attendees, (one third of whom were from the buy-side), met to discuss the benefits and drivers of FIX within the Australian financial community.
None of the expert speakers and panelists at the FPL event pulled their punches in a day that focused on both the business and technical issues of electronic trading in Australia. Against a backdrop of a tough six months for the Aussie markets, the need to catch up with global trends on FIX, compliance, transparency, liquidity and alternative trading venues was front and centre.
Elegantly moderated by Sky News Australia’s Bridie Barry, the day started with an interview with Michael Block. The General Manager of Investments for FuturePlus Financial Services, spoke about the importance of diversifying globally, and the kinds of systems that would allow this expansion. Block said transparency – in particular with regard to accountability and tracking – was essential with superannuation funds. The issue of cost was also going to take increasing prominence, with transactions costs being only the tip of the iceberg.
He argued that the financial services would shrink and the winners would be the managers that embraced the need for change. “Re-invent or die. Be an early adopter. Think globally and diversity your investment,” Block concluded.
Hot on Block’s heels, Prudential’s Richard Coulstock spoke about the revolution in the buy-side. He spoke about the need to test the liquidity as it slowly moves away from the traditional exchanges. Coulstock said that while trends from the US and Europe would expand into Asia, there was a need to appreciate this regions complexities. “This is a multi-market, multiregulation region,” he added.
The dealing landscape has changed, he argued, and with it greater responsibility was shifting to the buy-side. Both the client and regulator were forcing the buy-side to up its game, he said.
On the role of FIX, Coulstock was adamant. “FIX is vital to your business. It’s a global standard that makes our job more efficient and reduces the error side. We couldn’t do without it.”
A familiar face to most of the delegates, Greg Yanco, ASIC’s regional commissioner offered the perspective from the regulatory side.
Yanco started with an assessment of the fundamental strength of the Australian economy and how the local corporate culture had a strong focus on sound business models, appropriate controls and adequate reporting and disclosure.
He said ASIC as an active participant in the International Organisation of Securities Commissions (IOSCO), whose membership covers 95 percent of global markets, Australia was well positioned to shape the future role of regulators worldwide, and how this would affect the domestic market.
Finally, Yanco touched on the hot topic of short selling. He said the ban wouldremain in place, given the current market conditions, but that a decision was expected by 31 May.
With interactive voting technology, the delegates were asked: What should the priority be for the regulation of Australian trading? 44 percent pointed to the licensing of alternative venues, while 40 percent said the focus should be on the global financial crisis.
Back to basics
The mid-morning session took the delegates back to basics with Martin Koopman giving his FIX101 overview. It was the opportunity for people familiar with FIX to refresh their knowledge, and for newcomers to the protocol to enjoy a 10 minute crash course. The points he covered included:
- FIX is the language of Electronic Trading globally, with over 10,000 users globally
- FIX is a specification of what and how to communicate – it is not a software, network or service
- FIX allows greater connectivity with the rest of the world
- FIX is relatively new to Australia, but there is already a good knowledge of the protocol here.
- The rise in international order flow over the past two years has driven FIX usage in Australia
- It is not a competitor to IRESS. IRESS uses FIX
Two panel sessions followed: one buyside and the other sell-side. The clear message from the buy-side to the audience was that FIX was coming, and that we all need to be able to access it.
From the sell-side panelists, there was a consensus that FIX adds efficiency to the trading process. The role of FIX in driving the agenda of the sell-side connecting to exchanges was also discussed. Finally, an appeal was made to the vendors for a more cost-effective FIX solution for smaller brokers.
Meet the exchanges
In a lively session, representatives from three exchanges, NZX, Chi-X and Liquidnet, directed their questions at ASIC, asking when their application to operate in Australia as a competitor to ASX would be granted. The audience was then asked: Does Australia need alternative execution venues? An overwhelming 89 percent said yes. However when asked how may trading venues would make for market efficiency, 70 percent opted for fewer than five. While it gave panel moderator ASIC’s Greg Yanco lots to consider, he countered with a challenge for the exchanges to bring greater liquidity to Australia.
The day continued with the view from local buy-side firm, Prepetual’s Mark deCourcey during a panel session. DeCourcey had strong views on the benefits of FIX to the buy-side community. He argued that as a buy-side firm he wanted multiple solutions, and the FIX had changed the way they traded. ORC’s John Cameron explained that FIX should be considered as “simple plumbing” that should work seamlessly and, most importantly, that vendors should play a key role in making the roll out of FIX easy for clients. IRESS’ Peter Dunai said he was open to FIX and that they did not consider the protocol to be a competitor. “We already use it in our business and we’re seeing a greater demand for FIX connectivity,” said Dunai.
Delegates were then asked to vote on: What is the biggest driver for FIX adoption in Australia? 46 percent answered, offshore and international trading, and 38%, improved efficiency and risk.
Following a series of concurrently held sessions focusing on either the business or technical side of FIX, the final two presentations focused on some firsthand experiences using FIX in Australia and the future capabilities of the protocol. As Martin Koopman summarized, “The major benefit of FIX is the pragmatic way in which it can be used to solve real business problems.”
Concluding what was an exceptional event in terms of participation and content, Andrew Fraser of Challenger offered the delegates a simple perspective: “FIX is here to stay. There is no alternative.”