FIX Beyond Equities

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FIX Beyond Equities:
                                                           An EMEA Perspective
                                  By Daniella Baker, FPL Marketing and Communications Manager




We each have our views on the future of FIX; having                 Management System (EMS) market are moving towards
achieved mass adoption within the Equities space it seems           multi asset class capabilities. For FIX to continue, by definition
only natural that firms will continue to seek a competitive         it has to go multi asset class.”
edge from automated and streamlined business practices
across the additional asset classes. Through development of         This theme was evident throughout the discussion, firms
the protocol, expansion across the Fixed Income, Foreign            active within the market continue to operate in an
Exchange and Derivative markets has become a possibility,           increasingly competitive space and Darwin’s rules apply. You
as has vertical progression, as FIX continues to extend             may choose not to manage your assets in a multi asset class
throughout the trade life cycle covering a multitude of             manner; however there will always be other firms out there
functions including Allocations, Confirmations and Reporting.       who will. Therefore your future survival and client retention
                                                                     rate could depend upon your firm’s ability to also offer this
FPL believes that expansion across the asset classes will be
key to the future progression of the industry, and at the FPL
EMEA Quarterly Meeting held in London on July 13th the
                                                                        “The move in FIX towards
topic took centre stage, as leading members from the FPL            supporting multi-asset class trading
community participated in a lively discussion entitled “FIX          and operations, end-to-end, is a
Beyond Equities”.
                                                                        positive move for market
The financial services industry is evolving, not only are we                  participants.”
spreading our wings and exploring the benefits of global
relationships, but we are also no longer working in silos, as
                                                                    service. Eli Lederman, outgoing Co-Chair of the FPL EMEA
Alasdair Haynes, Co-Chair of the FPL EMEA Regional
                                                                    Regional Committee and Managing Director at Morgan
Committee and Chief Executive of ITG in Europe, explained,
                                                                    Stanley explained how this firm level choice actually has
the industry is without a doubt changing to a multi asset class
                                                                    industry wide implications, “The move in FIX towards
                                                                    supporting multi-asset class trading and operations, end-to-
“The financial services industry is                                 end, is a positive move for market participants. It may be an

evolving, not only are we spreading                                 investment that not every participant chooses to make, and
                                                                    that could mean some consolidation. But overall, the markets
our wings and exploring the                                         benefit by delivering greater efficiency.”
benefits of global relationships, but
we are also no longer working in
                                                                    Having established that for many firms expanding support of
                                                                    FIX across additional asset classes makes solid sense,
silos”                                                              questions arose as to why take up in the non-equity
                                                                    world has proven slower? One explanation is simply that
environment. People are now managing money in a global              certain markets such as Foreign Exchange are currently
fashion and not just in a single asset class form, but across all   well supported by proprietary protocols and that the need to
asset classes to achieve more profitable returns. The Order         move to an industry common protocol has not yet evolved.
Management System (OMS) market and the Execution                    However over time industry needs may change as Richard



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                             Alasdair Haynes, ITG (left), and Richard Balarkas, Credit Suisse

Balarkas, Co-Chair of the FPL Global Steering Committee            State Street Global Markets who stated that, “In a very short
and Managing Director, Head of Equity Trading Services at          time frame the Foreign Exchange space has moved,
Credit Suisse suggested, “The movement to a common                 additional trading models such as Prime Brokerage are
protocol will only change when the whole competitive
environment around the trading systems also starts to
                                                                   “...we may even be at a period
change, and this will be partly driven by cost. Over time,
running a multitude of protocols with perhaps a dwindling          in the investment industry where
market share might start to look rather unhealthy, and the         people stop looking at things in
                                                                   terms of asset classes and instead
cash cow that was your proprietary protocol and trading
system may soon become a piece of legacy infrastructure.”
                                                                   in terms of alpha and beta.”
However, some firms are already investing in FIX across
additional asset classes as they can foresee the future            becoming very prominent, and even since the introduction of
benefits. For example within the Fixed Income market, which        prime brokerage the way in which people use this service has
is naturally disjointed by geography, the need to utilise a        progressed… this is one way that the market is moving and
common protocol is highly prevalent. Without this a firm may       we may even be at a period in the investment
easily find itself supporting a multitude of protocols, which      industry where people stop looking at things in terms of asset
limit STP and margin potential. Silvio Oliviero, Vice President    classes and instead in terms of alpha and beta.”
of eCommerce, Credit & Rates at JP Morgan explained that
JP Morgan has chosen to become an early adopter of FIX 4.4         Discussion around the rate of acceleration sprung questions
for Fixed Income, he stated, “We leverage FIX to connect to        concerning the level of detail that FIX should support. As
various electronic trading platforms to support the different      trading practices emerge what should the FIX specification
trading models in order that both single dealer and                cover? After all, a specification that is the length of Tolstoy’s
competitive quotes can be sought via FIX. The organisation
is also leveraging FIX to expand its Transition Management
capabilities to Fixed Income. JP Morgan plans to upload            “...what should the FIX specification
the orders using FIX to execute and allocate them by using         cover? After all, a specification that
FIX.” He continued to state that “Electronically JP
                                                                   is the length of Tolstoy’s War and
Morgan supports FIX and the next step for progression will
be user adoption.”                                                 Peace may not prove desirable.”
A key observation that was raised in the discussion was the        War and Peace may not prove desirable. It may become a
speed of market progression, as commented upon by Chip             question of balance, and Kevin Houstoun, Co-Chair of the
Lowry, Co-Chair of the FPL Global Foreign Exchange                 FPL Global Technical Committee and Consultant at HSBC
Business Practices Subcommittee and Managing Director at           explained that the FPL Global Technical Committee is currently



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looking at various ways in which the specification may be
                                                                  FPL would like to thank the event chair Barry Marshall,
made more accessible, such as through the use of the FIX
                                                                  Co-Chair FPL EMEA Regional Committee and each of the
repository and by making it more computer readable to
                                                                  panellists for their participation:
manage the issue. Kevin commented, “We are working
towards a point in the future where firms will be able to
select the trading model and product that they want to            	 Richard	Balarkas,
support, and everything else will be defined.”                      Co-Chair FPL Global Steering Committee, Managing
                                                                    Director, Head of Equity Trading Services, Credit Suisse
The discussion raised many questions and provided
significant insight to all attendees. The discussions clearly     	
highlighted the sea of change that the electronic trading         			Kevin	Houstoun,
industry is starting to progress towards. We have come a             Co-Chair FPL Global Technical Committee, Consultant,
long way in the past decade and now that FIX has solidly             HSBC
set it’s roots in the Equities world, and many firms
throughout the industry are profiting from its fruits,            	 	Alasdair	Haynes,
further spread of adoption across the asset classes appears          Co-Chair FPL EMEA Regional Committee, Chief Executive
to be the next logical step. However that proved to be a             of ITG in Europe
conversation better contemplated over a glass of wine,
so up to the top of the BT Tower we went to enjoy the fantastic   	 	Eli	Lederman,
views of London and a glass of Merlot.                               FPL EMEA Governance Board, Managing Director,
                                                                     Morgan Stanley
                                                                  		
                                                                  	 	Silvio	Oliviero,	
                                                                     FPL EMEA Governance Board, Vice President,
                                                                   eCommerce, Credit & Rates, JP Morgan


                                                                  	 	Chip	Lowry,
             Any thoughts on this or other articles?                 Co-Chair FPL Global Foreign Exchange Business Practices
            Please send any comments, refering to
                                                                     Subcommittee, Managing Director,
         this article as Vol 1 Issue 11 EMEA 2, direct to
               Edward at edward@fixglobal.com                        State Street Global Markets




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