FPL News June 2011

Over recent months, testing of the new standard has been conducted in three independent real-world environments by separate FPL member firms. This initial round of testing revealed the potential for additional functionality to be added to further support business needs. Additional testing is now underway to review these enhancements to ensure that the standard meets market requirements as effectively as possible when it is released in Quarter 4 of this year.

High Frequency Trading

FPL has identified that many firms currently use costly proprietary protocols to achieve the highest levels of performance. To help the industry reduce cost, FPL has started work to develop a new standard for electronic trading, which can be optimised to support very high frequency trading. To achieve this goal, a High Performance Interfaces Working Group has been formed. Following the production of project scope documentation, this group is currently focused on defining the project’s detailed requirements before starting to create the specification and proceed into independent testing phases, which are expected to commence in coming months. The group is working to make the standard available for market adoption in early 2012.

Additional Support for Exchanges and the Fixed Income and Derivative Markets

Over the past 6 months, the FPL Global Technical Committee (GTC) has also released new functionality to enhance the core FIX specification that is now  available for market adoption. By working closely with exchanges in Asia and the U.S., further support has been added to enable equity and derivative exchanges to implement FIX in as standard a manner as possible.

From a fixed income perspective, new functionality has also been added to support the proposed requirements of the new U.S. three-way trade confirmation and settlement time processes as recommended by the Federal Reserve Bank of New York (FRBNY) Tri-Party Repo Reform Task Force. This group was created to identify and address the weaknesses in the U.S. tri repo market that became evident during the recent financial crisis.

Over coming months, the GTC is expected to release further FIX functionality which will include support for the futures markets to enable firms executing trades in line with give-up agreements to communicate the end-to-end execution source information, from execution through to clearing and settlement via FIX. Additionally, further functionally for exchanges is also due for release shortly.

New and Emerging Markets

In 2011, FPL has continued to work closely with market participants in multiple new and emerging markets globally to support growing interest in using the FIX Protocol to facilitate evolving electronic trading requirements. A primary example of this is the FPL India Working Group that was formed earlier this year and held its inaugural meeting in May. This group seeks to provide a forum to support the growth of electronic trading practices and FIX adoption in the region and the initial key areas of focus include addressing local implementation issues, understanding the challenges and opportunities prevalent within India and identifying the educational needs of the market, so FPL can gain a stronger comprehension about how it can more effectively support the local market. Additionally, in late 2010 FPL also launched a Middle East Working Group to help the organisation gain a stronger understanding of the needs of this region and plans to continue work with this group over upcoming months.

Promotion of the Standard

Promoting increased use and adoption of the FIX Protocol is key to the standard’s future success. To support this effort, in March FPL released FIXwiki, a FIX-specific wiki website that provides a comprehensive and authoritative view of the FIX specification. This interactive and educational web tool enables visitors to benefit from the knowledge that has been kindly contributed by other users, so they can enhance their usage and understanding of the protocol. FPL Member firm representatives are encouraged to actively contribute additional information to FIXwiki by providing comments and sharing knowledge and insight that will be used to support the future development of the protocol. FIXwiki can also be viewed by the broader FIX user community, providing a valuable reference tool for all market participants.

Central to FPL’s strategy of promoting increased adoption of the standard, is the various events it  organises in markets across the globe. FPL’s 2011 events commenced in January with the Dubai based Middle East Briefing, which was the first event ever held by FPL in the region and attracted a strong local audience keen to learn more about the benefits of FIX and how advancements in electronic trading are expected to impact market practices.

This was then followed by the EMEA Trading Conference in March, which attracting more than 900 delegates, proved to be the largest event ever organised by FPL and additional events were also held in Mumbai, Frankfurt, Hong Kong, New York, Boston, Tokyo, Sao Paulo and Toronto. In the latter half of the year, we look forward to events scheduled to take place in Mexico City, Singapore, Sydney, London, New York, Moscow, Stockholm, Tokyo and Chicago. If you would like to learn more about the events FPL will be hosting in 2011 please visit www.fixprotocol.org/events.

Within the first half of this year, FPL also participated in a carefully selected range of externally organised events, to benefit from the  opportunity to explain the advantages of using standards to key industry segments. This included exhibiting at the 36th annual IOSCO conference, held in Cape Town. IOSCO is the international standard’s setter for global securities regulation and its conference attracts representatives from regulatory organisations around the world. By participating in this event, FPL was able to further communicate how regulators can utilise the protocol in the development of future regulation, allowing firms to leverage their existing investment across additional business areas, generating significant cost and resource savings.

These are just some of the many initiatives currently underway by FPL, all ultimately focused on supporting the evolving business needs of the trading community to enable firms to optimise efficiencies and reduce cost. Participation in these initiatives is open to FPL Member firms and we encourage their involvement, for more information please contact the FPL Program Office by email at FPL@fixprotocol.org. If your firm is not a member of  FPL, but would be interested in finding out more about how to join please contact Bernie Simon, FPL Membership Relations Manager by email at Bernie.Simon@fixprotocol.org.