By Tim Healy, Global Marketing and Communications Manager, FIX Trading Community
When I was writing a preview of the year ahead for 2016, I wrote that 2016 was likely to be busy and volatile given how January was unfolding. The year has flown by and for the FIX Trading Community it has been marked by a number of successful events, new working groups, ongoing work in initiatives and increasing interest from the marketplace in the work that members have undertaken.
London, New York and Hong Kong have provided the locations for three tremendously successful events. Close to 2,000 delegates have attended the three events proving that the value of educational and networking events is core to the community. Technology and innovation are major themes for the membership and addressing the challenges of cybersecurity, the potential of blockchain and the burden of addressing regulation are not just regional issues. Looking ahead in Q3, Mumbai, Stockholm and Chicago will be the venues for FIX events in September. Whilst October will see FIX conferences held in Tokyo and Sydney. The community truly does span the globe and our events for organised by the members, for the members.
The FIX working groups have been convening regularly. As a colleague of mine always says “this is where the magic really happens”. The true value of being involved in the community can really only be seen or heard on these calls, where the different market participants meet to discuss challenges and issues in the marketplace. Below I will cover some of the highlights of this year-to-date. The Global Post Trade Working Group are now in the final stages of producing further guidelines for the use of FIX in post trade for a number of different asset classes including equity swaps and options. The original equities guidelines were initially produced in 2012 and have been enhanced since then following feedback from members. This latest stage of the initiative is important as the use of FIX becomes truly multi asset class both at-trade and post-trade.
The Cybersecurity Working Group has become extremely active in 2016 and the group members have concentrated efforts on encryption methods, most relevantly Stunnel encryption and router-to-router hardware encryption as well as key storage / key management. The headlines on the threat and reality of attacks have been numerous recently. As will be discussed in this publication elsewhere, the effects of communication and collaboration will be beneficial as FIX members discuss the on-going threats.
The Global Buy Side Working Group saw a changing of the guard for the leaders as three new Co-chairs took up their positions in EMEA and a new co-chair for the Americas has taken over to continue the work of their predecessors. The award-winning IPO Initiative continues to make strides and gain more attention from both the market and regulators. Earlier in the year, the Financial Conduct Authority (FCA) in the UK published its interim conclusions on investment banking and the work done by FIX to create a more efficient, less error-prone process for the allocation process has not gone unnoticed.
Additionally, the execution venue initiative has moved out from under this group as we are hearing from brokers that their clients are asking for increased granularity in the data so opening this initiative to the broader FIX membership is key so that we can understand the issues across the board in order to get our documentation reflective of what we face in these markets. The expanded group has just recently launched.
Whilst looking at the interaction with the regulators, it would be remiss not to mention the work done by the different MiFID subgroups that have been in existence for just over 12 months. Although the timeframe for the implementation for MiFID II has changed, the work being done has continued in earnest. Late in 2015, the MiFID Clock Synchronisation Working Group’s initial goal was publicised – enhancing the FIX Protocol to support higher time stamp resolution to enable market participants to be MiFID II compliant. This proactive enhancement highlighted FIX’s ongoing commitment to assist the market with the changing regulatory environment.
Additionally, the real value of the FIX Trading Community can be seen in the crossover work being done in a number of the working groups. The MMT Steering Committee are now pushing forward to have a fully MiFID II compliant version of the MMT standard that came under the FIX umbrella in early 2014. Together with the MiFID Transparency Working Group, the aim is to ensure the regulatory technical standards (RTS 1 and 2) are adhered to for pre- and post-trade transparency.
The Best Execution Working Group have worked through a number of different scenarios to provide guidance on reporting obligations for the buy-side, sell-side and execution venues and who will be required to report. This is no easy task given the amount of variables per asset class. Given the scope of both asset coverage and market participant, the working group is also liaising with the reinvigorated TCA Working Group and trade associations to promote their work and ensure no duplication of effort. As the year progresses, it is likely there will be further MiFID working groups initiated as the market looks to the community to provide that competitive-free platform to discuss the challenges that are confronting them.
With regards to new initiatives, a new technical working group started this year to set a standard to map the FIX semantics to JavaScript Object Notation (JSON) encoding. The JSON Encoding Working Group is now making good progress toward providing a Javascript Object Notation encoding of FIX. In recent years, JSON has become a dominant representation of information for the API economy and internet based services.
One of the most promising areas of innovation has come from the FIX Orchestra Working Group. Orchestration is the technical term for describing the behaviour of a protocol. There have been frequent calls for a machine readable rules of engagement that can describe the message flows, the message structure under various usage scenarios, conditionally required fields, and the conveyance of state. At the behest of Jim Kaye, the Global Steering Committee Co-chair and John Greenan, long term industry consultant, this led to the formation of the FIX Orchestra Working Group. The working group is set to submit Release Candidate 1 to the Global Technical Committee for approval. The goal of FIX Orchestra is to improve operational efficiency, reduce the time while improving the effectiveness of testing a FIX Service and reduce the time it takes to certify trading partners. In short, the hope is that the FIX Orchestra initiative will reduce the cost of FIX ownership. The FIX Orchestra effort triggered a number of proposed changes to the FIX 2010 Repository structure and as a result there will be a 2016 Repository edition that will be released in a Release Candidate format shortly after the Release Candidate for FIX Orchestra.
2016 will no doubt be an incredibly busy year. As I write this, the uncertainty surrounding financial markets across the globe has caused volatility to increase massively following the UK’s decision to leave Europe. Geo political tension across the region could herald a period of anxiety in the markets. From a FIX perspective, it will be important that we keep a business as usual attitude. Our members value the independence and neutrality. There may well be changes in the direction of regulation and, as an organisation, we will continue to work with regulators across the globe to ensure that we address any changes appropriately.
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FIX Trading Community – Half year 2016 report
