FIX 5.0:The Latest and Greatest

Bob Caisley, CIO of the Singapore Stock Exchange (SGX), recounts the reasons why SGX is adopting FIX 5.0
In June 2010, SGX unveiled a plan to launch the next generation of exchange trading in Asia through its SGX REACH initiative. Positioned as providing the fastest access to Asia, the SGX REACH initiative begins in the first quarter 2011 with the roll-out of co-location services at a Singapore Tier-4 compliant data centre. By the third quarter of 2011, SGX will implement a new trading engine (REACH ST) for the securities market. This will be delivered through NASDAQ OMX’s Genium INET platform providing an average order response time of 90 microseconds door-to-door using the native trading API. The last part of the REACH initiative is to establish points of presence in major liquidity venues around the world including New York, Chicago, London and Tokyo, thus enabling local connectivity for global customers and radically lowering cross-border connectivity costs.
Connectivity over FIX 5.0 is an integral part of the REACH initiative. Since March 2001, SGX has successfully offered FIX 4.2 connectivity to our securities market. However, like many older FIX gateways, SGX gateways are layered over an external trading engine API gateway. Such architecture is not ideal and introduces translation delays that can be more than a millisecond on top of the door-to-door latency of the trading engine. Unfortunately, in today’s context, an additional millisecond is one thousand microseconds too many.
With the new trading engine, SGX will deliver a faster FIX connectivity through NASDAQ OMX’s Genium INET FIX that is integrated directly to the internal message stream of the trading engine removing the need for additional translation. This new architecture and superior solution enables FIX connectivity to give performance very close to that of the native API. The choice of FIX 5.0 rather than continuing with FIX 4.2 or a higher version was taken because we wish to provide a rich FIX interface, delivering both order entry and market data feeds. Analysis of the differences between FIX 4.2 and FIX 5.0 for order entry has shown marginal differences and we believe the move to FIX 5.0 will be a simple step for our current and new FIX customers.
Advantages of FIX 5.0
FIX 5.0 has richer functionality and we expect that it will gain wider acceptance quickly and be able to support our future product growth. For example, with a more comprehensive set of tags, we have found little need to customize FIX, in order to fit SGX specific needs. Customers will also get significantly improved response times with the differentiation of order status and trade capture reports messages. At another level, the Application Level Sequencing facility introduced in FIX 5.0 has provided improved recovery of market data for trades, news and state messages. It also offers the opportunity to handle market partitioning in a more efficient manner. At the end of the day, our customers should find it easier to implement a more robust, reliable and much faster connection to the exchange.
Managing the Transition
Our experiences have shown that it surprisingly straightforward to map the data fields from FIX 4.2 to FIX 5.0. With less local interpretation on the tags, there is less debate on using the right fields. Expert help has also been readily available from NASDAQ OMX and FPL. If there were a challenge, I would say we spent some time getting clarity on the right FIX version to use. To guide our choice of FIX 5.0, we gathered feedback from participants and conducted a market scan.
We will be releasing the specifications by the end of the year and will be working closely with customers to support their migration to the new FIX connections. Trading participants will be able to conduct testing in the first quarter 2011 following conformance testing, move over to FIX 5.0 by third quarter 2011.