Seeking A Post-Trade FIX
FIX Protocol, the industry standard for carrying data and trading messages around the world’s equity markets, has issued new guidelines for global post-trade processing.
The non-profit organization, which has its headquarters in London, today released new industry-developed rules to aid the post-trade process between the buy side and the sell side, as well as to reduce costs.
The proposed measures include increased straight-through-processing, improved availability and enhanced transparency through ID-linked traceability from placement to pre-settlement.
In Europe, one of the drivers of the process is the move to harmonize the settlement date to T+2. Currently, settlement varies from one day to three or more for some equities markets.
Another is upcoming regulation in Europe such as the European Market Infrastructure Regulation and Central Securities Depository legislation, as well as the revised Markets in Financial Instruments Directive. In the U.S., the Dodd-Frank Act is the regulation covering the post-trade space.
“The new guidelines by FIX Protocol for the post-trade process are definitely a step in the right direction,” Andrew Muir, head of investment management marketing at the Society for Worldwide Interbank Financial Telecommunication (Swift), told Markets Media. Brussels-based Swift provides the global financial community with a secure and reliable network to exchange electronic financial messages.
“The whole area of post-trade communications throughout the whole eco-system, including which FIX exists, is rightly coming under a new wave of scrutiny.
“Part of the reason is the move to a trade day plus two settlement in Europe and another part of it is the increased focus on the whole post-trade process from regulators but also operational risk managers throughout the securities industry. Achieving these standards is fundamental to the achievement of those objectives. People are also talking about making it T+2 by as early as 2015 and that is quick.”
Muir added: “One of the unconquered territories in the post-trade domain is what is called the long tail of small clients and counterparties and it is enormously welcome that FIX is stepping up in this regard with all of the other standard providers and service providers linked by the Investment Roadmap to try and bring automation to that much needed area of the industry.”
Promoting FIX adoption for post-trade processing is consistent with the recommendations set forth in the widely adopted Investment Roadmap, which FPL produced in collaboration with other leading standard bodies. This roadmap allows the multiple messaging standards used by different organizations to better interact with one and other.
FIX has become the de facto messaging standard for pre-trade and trade communication in the global equity markets, and is expanding into the post-trade space to support straight-through processing as well as looking to expand into foreign exchange, fixed income and derivatives markets.
“Many parties must co-operate in the post-trade process including buy-sides, broker dealers, custodian banks and central clearing,” said David Tolman of Greenline Financial Technologies, a provider of electronic trading solutions.
“The current process is complex and requires considerable human intervention. The FIX infrastructure, knowledge and data, from the extremely successful use of FIX in order processing, can now be leveraged in the post-trade process.
“Extending the use of FIX substantially reduces complexity in the communication and matching process, resulting in fewer matching issues, faster processing and lower costs. The availability of an industry standard will reduce implementation and on-boarding time, and the associated financial investment.”
The guidelines cover post-trade processing for both U.S. and non-U.S. equity markets.
“The adoption of these guidelines carries with it the promise of a significant step towards achieving a higher degree of straight-through-processing for equity trades,” said Brian Lees, manager of application development at buy-side firm The Capital Group Companies and co-chair of the FIX Protocol execution venue group.
“The transparency made available by improved traceability from trade execution through to pre-settlement offers exciting possibilities for reducing errors and improving trade matching rates while minimizing costs by leveraging existing investments in FIX infrastructure.”
The trade repository failed to ensure data integrity and provide access to regulators.
This was the first time ESMA found breaches in confidentiality and integrity of EMIR data.
A briefing paper supports alignment of the clearing obligation under the EMIR and MiFID II.
The regulator published its final report on EMIR and SFTR data quality.
The agreement covers US derivatives clearing organizations recognized under EMIR.