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Association Regulation Archive Articles

Multi-Tasking For Successful Implementation

Tim Healy 14By Tim Healy, Global Marketing and Communications Director, FIX Trading Community

FIX Trading Community is taking the initiative as markets prepare for the impact of MiFID II and meet new challenges.

The second half of 2016 saw a significant uptick in meetings and calls relating to the impending Markets in Financial Instruments Directive (MiFID II) regulation. What became clear, is that the marketplace is keen for FIX to provide some practical answers to the implementation questions and members have stepped up to work collaboratively and set down on paper, guidelines, best practices and workflows.

Additionally, changes to the FIX Protocol will occur with new tags and new values for existing tags in order to pass required information between investment firms and venues. Clearly, 2017 will be another busy year for the FIX Trading Community and its members.

By the time this article is published, the first in a series of extensions to the FIX Protocol will have been published which covers a number of the requirements of MiFID II, particularly RTS 22 and 24. Without going into specific detail here, what is worth noting is that FIX is endeavouring to make sure that all firms who are under MiFID II obligations will have the ability to be compliant in an efficient manner.

FIX is ubiquitous in trading and it is important that the enhancements to the Protocol are available for all investment firms. Regulators are keen to see a standardised approach to the solutions that investment firms use to meet their obligations and a unilateral, rather than bilateral, approach is far more sensible and efficient.

Away from the regulatory aspect, there were a number of other initiatives during 2016 that members worked on, the aim for these being to bring even greater efficiencies to processes and workflows.

Last August, new guidelines were released for the use of FIX in post-trade processing for multi-asset classes. The Global Post Trade Working Group has been working on providing a standardised and detailed set of guidelines for futures, equity swaps and FX equity options for some time now and, with the release of this new document, FIX has addressed issues by providing a common workflow with minimal differences across asset classes.   Market participants will be able to reduce risk and have the ability to leverage off their current FIX infrastructure in place for trading and, by doing so, minimise implementation time and costs.

The Cybersecurity Working Group was particularly active last year. It is a topic that is never far from the news and the headlines and it is important that FIX Trading Community addresses these concerns and encourages information sharing among its members. In addition to updating the FIX Security White Paper earlier in 2016, the working group has been drafting guidelines for the use of a Transport Layer System (TLS) protocol with FIX. TLS is a rich protocol with many features and options and allows for new security functions to be added and vulnerable functions to be dropped.

Collaborative efforts
FIX Orchestra was conceived as machine readable rules of engagement between counterparties. Anyone who has worked with FIX in onboarding, testing and certification will understand that some of the workflows can be time consuming.  The aim was to create a much more efficient process with machine readable rules of engagement with the intention to cut time to onboard counterparties and improve accuracy of implementations. At the end of 2016, the working group was producing a technical standard proposal that will be reviewed and released in 2017.

The Blockchain and Digital Currency Working Group have been working on a number of different initiatives relating to post trade and symbology for digital currencies. Although nothing has been firmed up as of writing this piece, discussions are underway with a trade association to create a governance structure for maintenance and assigning values and to create symbology which would be used for digital currencies.

In a similar way, the Trade Cost Analysis (TCA) Working Group has been working with a buy-side trade association on the original TCA for Equities Best Practices document that was released a few years ago. This new input will serve to enhance the already detailed document and the working group are now keen to move forward to relook at TCA for other asset classes.

As you can see, there is a strong air of collaboration in the marketplace at present. FIX is not a lobbying body or a trade association, but is a trade standards body that brings together the actors in the market, as well as the vendors, and affords them the opportunity to look at how the use of standards can address and solve real issues in the market.

This neutrality has been recognised by the regulators and trade associations and FIX members are working with both to ensure coordinated action to keep any potential duplication of effort to a minimum. As an inclusive organisation, FIX welcomes new members so if you are not a member of FIX Trading Community and wish to help shape the future of trading, please contact us at [email protected] to learn more.

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