FIX Migrates to Post-Trade
The FIX protocol, which is now embedded within most pre-trade instructions, is being used for post-trade messages as well.
Both buy and sell side firms have been working to implement new guidelines for implementing FIX in post-trade.
“Historically, FIX has been associated with pre-trade, but the industry is now looking at how confirmations and allocations can be delivered using FIX, including information about how settlement instructions and market fees can be represented,” said Courtney McGuinn, operations director at FIX Protocol.
FIX Protocol Ltd (FPL) has published updated guidelines for the use of FIX for post-trade processing, which are now being successfully implemented globally by many investment managers, broker dealers and vendors.
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.
“FIX Protocol provides buy and sell-side firms with a standardized approach for more effective management of risk issues, enhanced transparency, reduced costs and greater efficiencies for equities post-trade processing,” said McGuinn. “We’re thrilled to see early adopters expanding their use of this technology to increase efficiency in the post trade environment.”
FIX Protocol has been considered a reliable, open and independent industry standard for years, with many asset managers and brokers adopting the technology for front office messaging pertaining to executions and orders.
More recently, some asset managers have also chosen to use FIX to communicate their allocations to their executing brokers.
Liquidnet and Capital Group have become the first broker and asset manager combination to successfully complete the post-trade lifecycle by utilizing the FIX Protocol.
“At Liquidnet we are constantly searching for new ways to partner with our Members and provide them with value-added solutions to their everyday needs,” said Paul McSherry, head of U.S. trading operations at Liquidnet. “By employing FIX Protocol, we now have a reliable and highly customizable tool that enables us to further cater to the buy-side community’s evolving needs of minimizing cost, diversifying risk and processing trades seamlessly.”
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.
“When we first took on this project, we were looking for an alternative to our current post-trade process. Leveraging our existing front office FIX infrastructure for confirmations seemed an efficient and cost effective solution” said Darrin Vallone, vice president of operations at Capital Group. “We put together a great team to work on this project and what they were able to accomplish in such a short time is impressive.”
Algorithms have become more prevalent in the spot FX market.
QB’s Algo Suite for futures market trade execution is also being co-located to HKEX.
Breaking data silos is key to deploying automation beyond 'nuisance' orders.
They can be used on quantum hardware expected to be available in 5 to 10 years.
Streaming blocks change the basis of matching and price discovery so institutions can find new liquidity.