FIX Issues Post-Trade Recommendations

Terry Flanagan

Regulatory and market forces are mandating improvements to post-trade processes such as conformation and settlement.

“With the multitude of regulation being debated or approved for implementation, the financial sector must navigate myriad new rules,” said Paul Taylor, director of global matching at financial messaging company Swift, in a blog posting. “Post-trade operations, typically an area of activity driven by the sell side, though more recently also by larger buy side firms, are also challenged by the slate of new regulatory or market events, whether that be Emir, Dodd Frank, CSD-R or T2S.”

FIX Protocol Ltd (FPL) has published updated recommended guidelines for the use of FIX for post-trade processing, including best practices regarding the use of FIX to support allocations, confirmations and affirmations.
The guidelines are now being successfully implemented globally by many investment managers, broker dealers and vendors.

“Through market feedback we have been able to provide more detailed guidance about how confirmations and allocations can be delivered using FIX, including further information about how settlement instructions and market fees can be represented,” said David Tolman, chair of FPL Americas Buy-side Post-Trade Working Group.

After using FIX for the order and execution processing, a buy-side firm can simply send a FIX Allocation with account-level breakdowns, and the sell-side firm will send a FIX Confirmation message for each account. After successfully matching, the buy-side firm then responds with a FIX message to affirm each confirm creating a succinct process with an audit trail.

As the tolerance level for post-trade inefficiencies is minimized, the industry is witnessing a determined drive to adopt free, open and non-proprietary standards as the platform on which firms can manage their operational risk and cost base.

The strain on the industry’s post-trade infrastructure is expected to permeate further with increasing regulation, shorter settlement cycles and the recognition that there is no competitive edge in this space.

The FPL Post-Trade Processing Guidelines were originally disseminated in April 2012 by the FPL Americas Buy-side Working Group to help address these challenges, and enable firms to leverage and extend their existing FIX investments into the post-trade environment, and also benefit from the many advantages delivered by increased straight-through processing (STP).
These firms have provided significant feedback throughout the implementation process, which has been incorporated into the guidelines as they have been revised and extended.

“Extending the use of FIX to post-trade completes the communication cycle between buy-side and sell-side firms,” said Scott Atwell, FPL director and manager of FIX trading and connectivity at American Century Investments. “The benefits include efficiency gains, improved straight-through processing, and quicker identification of issues, all of which provide significant risk reduction and cost savings.”

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