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The FIX Protocol Moving Forwards

The FIX Protocol Moving Forwards . George Macdonald, Co-Chair FIX Protocol Global Fixed Income Committee , Director, Macdonald Associates. Agenda. What is FIX? FIX Growth Across the Asset Classes & Throughout the Trading Process The Benefits of FIX and Standardisation FIX 5.0

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The FIX Protocol Moving Forwards

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  1. The FIX Protocol Moving Forwards George Macdonald, Co-Chair FIX Protocol Global Fixed Income Committee, Director, Macdonald Associates

  2. Agenda • What is FIX? • FIX Growth Across the Asset Classes & Throughout the Trading Process • The Benefits of FIX and Standardisation • FIX 5.0 • FAST ProtocolSM

  3. What Is FIX?

  4. What is FIX? • The FIX Protocol is a free and open messaging standard developed in 1992 by Fidelity Investments & Salomon Brothers. It was originally created to facilitate a bi-lateral communications framework for Equities trading but it has significantly expanded since this time. • FIX is now the de facto messaging standard for pre-trade and trade communication globally within the Equity markets. • FIX functionality has now expanded horizontally across the asset classes to support the Derivatives, Fixed Income and Foreign Exchange markets. • FIX functionality is now rapidly moving into the post-trade space, supporting Straight -Through- Processing (STP) from Indication-of-Interest (IOI) to Allocations and Confirmations has also expanded vertically through the trade life-cycle from pre-trade and trading to STP from IOIs to allocations. • FIX started in the buy side to sell side space but is now expanding the sell side to market infrastructure space

  5. FIX Growth Across the Asset Classes and Throughout the Trading Process

  6. FIX Support for Equities and Derivatives

  7. FIX Support for Fixed Income and Foreign Exchange

  8. Benefits of FIX and Standardisation

  9. Why does FIX matter? • FIX matters because transaction costs matter! • The pressure is on for the industry to reduce costs and improve performance: • Regulators are pushing for transparency • Reduced equity returns force portfolio managers to control costs • Best execution is quickly becoming a key selection criteria for the final investor Copyright (c) FIX Protocol Ltd.

  10. The benefits of using FIX Virtually every major stock exchange and investment bank uses FIX for electronic trading, as do the world's largest mutual funds and money managers and thousands of smaller investment firms. Leading futures exchanges offer FIX connections and major bond dealers either have or are implementing them. Why? Electronic trading and the FIX Protocol deliver: • Increased trade efficiencies • Quality execution • Enhanced transparency • Reduced operational risk • Significant ROI • Streamlined business practices

  11. FIX as a solution for more industry participants • FIX started within the buy-side to sell-side order routing space • FIX offers Derivative post-trade pre-physical settlement support • Allocations • Trade capture and trade reporting • FIX added pre-trade support • IOI, Quotes • Algorithm OMS configuration • FIX market data support • FIX for exchanges • Order life cycle • Product and trading reference • Market data dissemination • FIX for all

  12. FIX 5.0

  13. FIX 5.0 In January 2007 the FPL Global Technical Committee launched FIX 5.0 in response to the challenges currently facing the industry. FIX 5.0 significantly expands the messaging functionality provided by earlier versions of the protocol. The additional functionality delivered by FIX 5.0 includes, but is not limited to: Market data optimisation extensions improving book management Enhanced support for foreign exchange trading Enriched order routing features for reserve, peg, and triggered orders Major new support for post-trade and clearing processes for allocation, trade and position reporting Support for Reg-NMS, and MiFID regulatory initiatives Algorithmic trading extensions to better support the exchange of information used to initiate and execute algorithmic trading strategies

  14. FIX 5.0 FIX 5.0 also includes a Transport Independence framework, including FIXT1.1, which separates the FIX session layer from the application layer, enabling different message versions to be used within the same FIX session FIX 5.0 introduced a service pack model that allows FPL to regularly update the specification to support regulatory change and evolving business needs. From a business perspective this significantly reduces the financial investment required to support new releases while allowing FIX to be used with a wider audience of participants from the most demanding low latency users, to those requiring massive scalability The FIX 5.0 specification is available for download from the FPL website at www.fixprotocol.org/specifications

  15. FIX 5.0 Service Pack 1 In March 2008 FPL plans to launch the FIX 5.0 Service Pack 1, which will include 25 Extension Packs, each of which will further enhance the current functionality delivered by FIX 5.0. The additional support will include: Enhanced Listed Derivatives reference data support for Options, Futures, and Options on Futures Foreign Exchange OTC settlement obligations Improved functionality for exchange quotation models and order routing practices New set of messages for Market Structure definition Support for trading listed Interest Rate Swaps Application level sequencing with advanced support for market data recovery Improved integration between FIX, FIXML and FpML Changes to Rule80A, OrderCapacity, and Order Restrictions to reflect revised NYSE regulations

  16. The FIX Adapted for STreaming (FAST) ProtocolSM

  17. The FAST ProtocolSM The FIX Adapted for STreaming (FAST) ProtocolSM was developed by the FPL Market Data Optimisation Working Group in response to the skyrocketing trading volumes that have emerged from the growing popularity of automated and algorithmic trading. FAST Specification 1.1, the version recommended for adoption by the FPL Market Data Optimisation Working Group was launched in January 2007. The FAST ProtocolSM is a data compaction methodology that optimises communication in the electronic exchange of financial data, radically reducing message size and bandwidth utilisation, without negatively impacting latency.

  18. The FAST ProtocolSM It has been designed specifically for the high-volume securities markets. FAST thrives on large quantities of data that share similarities in content and structure, presenting significant opportunities for the global capital markets. The FAST ProtocolSM has many uses, in addition to presenting a solution within the market data arena; it may also be applied to other areas demanding high compression and low latency communication such as high frequency trading, Direct Market Access and exchange interfaces. A number of leading industry players participated in the FAST ProtocolSM proof of concept testing which generated some very positive results.

  19. FAST ProtocolSM • FAST is being now explored further and/or implemented by leading market centers including: • Archipelago • Chicago Mercantile Exchange • International Securities Exchange • Deutsche Börse Group • NYSE • OPRA • OMX • SWX

  20. Would you like to find out more? Please visit www.fixprotocol.org

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