BUYSIDE STANDARDS.
By Tim Healy, Global Marketing & Communications Manager, FIX Trading Community.
The Global Buyside Committee of the FIX Trading Community is one of the most active committees within the organisation. Under the neutral umbrella of FIX, the committee comes together on a regular basis to discuss initiatives that will address different issues in the market and how the use of standards can potentially solves these issues.
The role of the buyside trader has evolved greatly over the years and has been written about widely and in great depth. Allegations that the buyside were kept in the dark about trading patterns and venues and what was really going on with their orders have been correctly refuted. As the markets have become more electronic, so the appetite for technology and change has grown. The idea that the sellside have a few more ‘golf clubs in the bag’ in terms of information about market trends is also now not the case as the demands on buyside traders have increased from both regulatory requirements and their own clients’ demands. Asset Managers are more aware than ever about market structure issues and no longer purely rely on their brokers for information flow. The ever increasing use of TCA and the granularity of information that can be gleaned means that the buyside have an immense amount of information at their fingertips, much of it in real-time.
The buyside’s involvement with the Community has been crucial to its development and progress over the last 15 years. However, the Global Buyside Committee itself is still relatively new and perhaps reflects how the role of the buyside trader has evolved. The Committee has focused its efforts on a number of different initiatives to leverage off greater use of FIX within the life cycle of an order.
Whilst not being especially controversial, the investment process means that any initiative proposed by the buyside will ultimately involve the sellside being fully engaged. Recent examples of Execution Venue analysis work and the IPO Initiative bear this out.
A press release at the end of February officially announced that a set of Best Practice guidelines had been published to assist market participants with the IPO allocation process. The work undertaken by the IPO Subgroup (made up of members of the Global Buyside Committee) had started in 2014 as the participants sought resolutions to a manual, potentially error-strewn process. One of the key thoughts behind this was to try and replicate the regular order entry for the IPO process to avoid the double keying, acknowledging that some of the orders entered for an IPO could be the largest for an asset manager on at least a daily basis in notional terms. Taking the initiative for this, the buyside have approached the vendors and the sellside to ensure that all interested parties are aware of and fully involved in the proposed workflow.
The work being done for the Execution Analysis has been in progress for a while now, certainly before Flash Boys was even a twinkle in the author’s eye. A few years back, an effort was undertaken to define the usage expectations around the FIX fields that describe the final destination point of an execution, the capacity of the broker for the execution and the nature of liquidity (added or taken) for the trade. This effort resulted in the FIX Trading Community producing a set of recommended practices guidelines which are now being successfully implemented by the sellside. The push for greater adoption and standardised use of the FIX tags is ongoing. Of course, there is still work to be done regarding this and the different nuances of markets across the globe means each region may well have its own guidelines based on a generic procedure.
The Buyside Committee have also been spearheading the Global Post Trade Working Group alongside a number of vendors and sellside participants to promote the use of FIX in the post trade workflow. The working group is focused on building on the existing guidelines now being adopted by many major buy and sell-side firms, and providing further recommendations for how FIX can be used for post-trade processing across the major asset classes.
The Symbology Initiative is aimed at creating test symbols across the globe that will enable the buyside to rigorously test in a production environment whilst not violating any laws on a particular exchange. Members of the Working Group have been engaging with different exchanges to ensure this initiative meets the requirements of all those concerned.
A number of other Working Groups also have active buyside involvement. In 2014, the TCA Working Group published an initial set of guidelines aimed at standardising the terminology in TCA for equities. The benefits will be industry-wide of course and not just for the buyside, but their involvement has been crucial given their increased appetite for TCA and will be going forward as the scope broadens out into other asset classes.
Late 2014, saw the announcement of the creation of a set of recommended Best Practices for the use of FIX for the exchange of pre-trade information in the bond markets. Under the guise of Project Neptune and facilitated by Etrading Software, the buyside and sellside have collaborated on how to get a more efficient process for the dissemination of pre-trade information in the bond market.
The 2015 EMEA Trading Conference took place on March 10th in London. Over 150 delegates affiliated to buyside companies registered to attend on the day. Under the umbrella of the FIX Trading Community the participation of this group at our events across the globe is absolutely crucial going forward. Their support of the many different initiatives across the Community ensure that we stay relevant and up-to-date with the different issues in the market place.
©BestExecution 2015[divider_to_top]
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