With Brian Lees, Chair, Execution Venue Sub-Group, Global Buy-Side Committee, AVP, Trading Technology Manager, Capital Group and Irina Sonich-Bright, Director, AES Business Development, Credit Suisse, Co Chair of the FIX European Business Practices Subcommittee, Co Chair of FIX MiFID II Transparency Working Group
Brian: Many of the execution venue’s sub-group’s most recent updates have been driven by ongoing changes to European regulations around brokers’ execution capacities. There are some aspects that need to be clarified as they are not addressed in the current documentation, including the issue of properly capturing time stamps. This is becoming more important due to MiFID II requirements which include transaction reporting and time stamps.
We also need standardisation in the time stamps of the trades in order to conduct proper TCA because we are beginning to use that to match up to market tick data in order to do analysis. If time stamps are inaccurate, then it is hard to find our footprint in the market. The problem goes beyond how granular a time stamp is; we may also have the wrong time stamp altogether. People in the group have found that time stamps don’t actually represent the ‘actual’ time that the order transacted on the venue itself. Instead, brokers are stamping the order with a time stamp when it passes through their gateway before it is returned to us. We require clarification that it is always the ‘actual’ time stamp that comes back from the venue. Tightening up this process will make it easier to analyse and use the data as it was intended.
Irina: I agree that there is still an ongoing dialogue regarding what kind of timestamp we need to give to our clients – would it be the timestamp when the actual execution took place or when the broker sent the execution to the client? In theory you need to know both – time of the execution and time the broker sends the message to you – and without mutual agreement as of what should go into the execution time tag you end up with different interpretations. The next level is the granularity of the execution timestamp. MiFID II is trying to address both of these issues but until it’s finalised, we rely on the collaboration forums like the FIX Trading Community to address the immediate demand. Worth mentioning that just like with the liquidity provision tag (851) in Europe, not all exchanges provide us with the milliseconds granularity right now. However, where we are able to access this data, we can deliver it to clients.
We still have clients who do not receive all the necessary information, and if they do receive the information, it may not be consistent when presented by different brokers. There may also be clients who request similar information but in a different shape or form. Also, between the buy-side and the sell-side we have vendors making changes to the data on broker or client requests that might be inconsistent with someone else’s ask.
The execution venue paper (in its original form) therefore began a very necessary push towards standardising our approach to these issues of transparency. This is an area that will continue to develop as more specific technical requirements for MiFID II implementation are released.
Global and sell-side involvement
Brian: Another of our ongoing goals is to increase the global reach of the working group (which has been primarily US-based), to try to bring together conversations in Europe and the US. We can bring Asia into the conversation but it has been difficult getting some of the necessary information like tag 851 from the exchanges. So as a result, we are less concerned with Asia; the market structure doesn’t drive as much of a need as it does in the US and Europe.
The key to continuing the development of this working group is to get more people involved. I am hoping to reboot the whole project, to expand it globally to bring in a much broader representation of the buy-side and sell-side and to get it all moving again. With all the changes to the regulatory process, we need clarification put out there on how to manage transparency and the associated data – the requirement is only going to grow.
A further point to make is that the group was originally a buy-side only working group but we are hearing from brokers that their clients are asking for increased granularity in the data. As a result, we would like to expand the group to include more buy- and sell-side representation, so that we can understand the issues on both sides in order to get our documentation reflective of what we face in these markets. We have to decide on the precise scope of the working group and what should be considered a special case, and we need to work together with the sell-side to figure that out.
In addition, we have undertaken mapping of tag 851 values for US exchanges from the exchange hubs themselves, the raw exchange hubs to tag 851 values of 1, 2, 3 and 4. It might be that something similar is needed for the European exchange, but we don’t know if the sell-side is having the same difficulties in mapping these tags as the US sell-side was.
Irina: We are also receiving feedback from buy-side firms who are not necessarily participating in driving the change. For example, there are still buy-side firms who are unable to support MIC codes and we need their input to ensure we take their technology into account.
This is why we like a proactive buy-side acting as the driving force for the working group. We are trying to be more proactive too, but the message needs to go out that this is now industry-standard and firms need to be involved.
We already have a good foundation upon which to build a more detailed framework, and if we reach a broader spectrum of people then we can include more diverse requirements in the documentation.
Global impact of a change adds yet another complexity towards streamlined implementation. We have different regulations and initiatives and sometimes contrasting interpretations of scenarios within different countries. While developing a global standard, people need to tell us when something doesn’t work for them. Any minor changes to the specifications (especially if they override the meaning of a previous figure), are very dramatic because they cause a ripple effect. The sooner more people interact with the group that actually designed these specifications, the better it is for everyone.
The FIX protocol used to be perceived as an IT speciality, but changes in the protocol and our ongoing work is increasingly affecting the trading and business parts of a firm.
There is considerable dialogue and coordination between the different buy-sides and sell-sides to understand whether what was asked for is actually possible.
Brian: We have traders who are now aware of tags 29, 30 and 851. The groundwork has been laid but the key is getting more people involved in order to move this forward and to make sure that the industry’s needs are represented.
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Driving Execution Venue Analysis To A Global Audience
