Korea – A FIX Conversation Initiated
By Josephine Kim
FIX is still a relatively new concept in South Korea. Though it is on everyone’s mind and its potential is clear, how do we move forward? FIXGlobal initiated this conversation with almost 200 industry leaders at their recent Face2Face event in Seoul. Credit Suisse’s Josephine Kim encapsulates the conversation.
Korea is one of the ten largest economies in the world with an increasing number of institutional and foreign investors, making FIX Protocol an ideal choice. But why is the use of FIX in Korea still in its infancy?
This was the key conversation point with representatives from Korean financial players and the exchange at the recent FIXGlobal Face2Face forum held in Seoul on November 10, 2009. Ryan Pierce, Technical Director of FPL believes there are advantages to being a relative newcomer in the FIX arena. “If a market has not already adopted FIX, then they are working with a clean slate, making it easier to implement the latest version.” In other words, it gives them the ability to jump past the earlier FIX technologies to a more sophisticated version.
The buy-side speakers at the event were vociferous in their support for FIX. Fidelity’s Kan Wong and Samsung Investment’s Young-Sup Lee spoke to Nomura’s Rob Liable, and all were enthusiastic about the positive impact of FIX on their business. “Earlier, all our orders were over the telephone or email. Sometimes there were errors while placing orders or we had delays in order-processing that hurt our trading performance. We adopted FIX in 2006 and the results have been very clear: our team is more efficient and we are better able to respond to market conditions,” said Lee. “In 2006, when we adopted FIX, we had three traders. Today, though we handle a lot more trades, we still have only three traders. That’s a clear sign of how FIX has driven efficiency in our team,” he added.
With the buy-side supporting FIX, the attention turned to the exchange. Hong Kim and Chang Hee Lee from the KRX and Daegeun Jun from Koscom were all eager to be involved in the ongoing FIX discussions as they understand the growing importance of the protocol. They demonstrated a clear understanding of FIX and its many benefits, recognizing that many institutional investors are active users. So far, the Exchange has not adopted FIX due to the reluctance of some of their members to make changes.
The Korean market is dominated by retail investors who prefer to trade offshore stocks on their own. Some argue there is also no burning need to adopt FIX Protocol as the trading desks use the Exchange’s proprietary system to execute their trades. Though it resembles the global protocol, the Korean protocol – KFIX – has some fundamental differences from it and lacks the various message types available with FIX. KFIX originated in the Korean environment for trading between local institutions. KFIX has served well until now, but FIX would be the way to go forward. The Korean Exchange representatives believe their work with other international exchanges and increasing demand from the international buy-side to track liquidity may be a driving factor that will encourage the Exchange to adopt FIX and be part of the global standard.
The conversation has been initiated in Korea and the Exchange’s desire to be involved is also clear. Now what we need to do is to continue the discussion on adopting FIX while taking into consideration the uniqueness of the Korean market.