FIX Repo Community Amid COVID-19: What is the Way Forward?

By Neena Dholani, Global Marketing and Membership Director, FIX Trading Community

To say 2020 has been challenging is an understatement. It is accepted industry practice that post-trade services do not receive the same investment support as the front office. The effect of COVID-19 on trading stabilised quickly, but it also magnified the opportunity for the industry to focus on some of the concerns regarding trading repurchase agreements, or repos, as an asset class, in particular for post-trade operations. It has focused the debate and accelerated a further push for Straight Through Processing (STP). As a result, there’s been a call for action to improve automation, and remove and minimize the manual processes by which the industry currently operates in post-trade allocation, and other post-trade life cycle events such as netting, collateral and settlements. Additionally, many market participants have their own processes and expectations, which for broker-dealers having to deal with different processes, limits their ability to scale their businesses. This drives a real call out for automation and an industry best practice standardisation across the trade life cycle between all Repo market participants.

The COVID-19 crisis has illuminated the need and accelerated the uplift for standardising post trade for repos. On a recent FIX Repo webinar (youtu.be/f1Ypzuop3_E), 56% of the firms that participated indicated that they used FIX for Repos, and there’s a real sense and agreement about increasing automation of repo workflows and making it interoperable toward a digitised process. 

The impetus of the FIX Trading Community Repo Working Group was to develop and maintain a standard set of implementation guidelines on using FIX messages for automating the full life cycle of repos, including post trade, asset servicing, collateral management and regulatory reporting through the full life cycle and ecosystem across brokers, clients, custodians and service providers. A pillar of the FIX mission statement is to provide a neutral, collaborative environment; the collaboration within this group is an example of the mission at work, subject matters experts from across front office to back office, volunteering their time and working together to deliver solutions and enable the standard to mature. 

What has the Repo Working Group accomplished to date?

The working group assessed what was previously published for Repo support in FIX 4.4, updated the existing guidelines to reflect the current market structure and regulatory reporting data requirements, and published two recommended best practice documents for trade and post-trade bilateral and tri-party repos. The recommended practices have been produced to define the industry practices for the common usage of FIX messaging for request for quote (RFQ), quote, trade, allocation and confirmation messages for repos. This effort focused on leveraging existing FIX messaging to support the repo requirements. During the review process the working group identified gaps in the FIX protocol where necessary to support the repo bilateral and tri-party trade and post-trade workflow. These gaps have been addressed in an extension pack which can be found on the following link: fixtrading.org/packages/ep258-bilateral-repo-trade-post-trade-enhancement

To access the recommended practices documentation contact fix@fixtrading.org or use the links below. 

Recommended Practices, Trade Bilateral and Tri-party Repos

fixtrading.org/packages/fix-recommended-practices-bilateral-repos-trade/ 

Recommended Practices, Bilateral and Tri-party Repos

www.fixtrading.org/packages/fix-protocol-recommended-practices-bilateral-repos-post-trade/

What’s next for the FIX Repo Working Group?

Clearly the messages which have been created can be leveraged for the opportunity to use across other components as illustrated in the table below. On a recent FIX repo webinar the attendees were asked which components of the repo market they see as the biggest challenge — 52% voted Lifecycle events. 

The pandemic has highlighted areas in the lifecycle which need improvement and now firms are willing to invest to improve the ecosystem. Whether you are a market participant from Europe, Asia or the Americas there is further work to be done to improve automation on repo workflows. If you want to get involved to benefit from this current focus, reach out to us at fix@fixtrading.org