The Case for FIX 5.0

Infosys Consulting’s Mahendra Hingmire and Parthiv Mehta explain how FIX 5.0 can improve automation, reduce costs and increase revenue through greater efficiency.

Early FIX solutions

The FIX Protocol has evolved from supporting equities to supporting messaging requirements of multiple asset classes, including derivatives,fixed income and foreign exchange.

The explosive growth of use of FIX, facilitated by the flexibility it presents, the parallel growth and use of proprietary application programming interfaces (APIs) by the exchanges, met the industry’s immediate needs for business growth. At the same time, the earlier versions necessitated certain costs on maintenance, interconnectivity and language translators.

The flexibility to create custom tags, met the needs of individual firms, however, this practice can also lead to the generation of non-standard versions of the protocol and its widespread use can result in higher costs of implementation and a longer time for deployment for the industry. Also, the tight coupling of the application layer and the business layer in FIX4.X versions limited the ability to adapt to newer functionalities offered by later FIX versions.

Demand of the Industry and FIX 5.0

The industry as a whole needed to address the limitations of the existing protocol as well as find a protocol flexible enough to support their future requirements. FPL came together to address the dual needs of its members and the outcome was FIX 5.0 and FIXT.1.1, the FIX Session Protocol, as an answer to its members’ requirements.

Transport independence disconnected business messages from their carrier thereby allowing different versions of FIX Protocols to be run on the same session via any appropriate technology, in addition to the FIX Session Protocol. This feature helped reduce technological constraints and made it possible for firms to communicate with each other regardless of their FIX version. This is possible because FIX 5.0 runs on top of the FIX Session Protocol. Transport independence serves the industry’s need to use the existing FIX versions and also help firms reduce the future cost of implementing new FIX versions.