Getting the Right Fit : Buy-side, Sell-side and Vendor on Non-Standard ATDL Implementation

How would you characterize your clients’ expectations regarding FIXatdl^SM and algorithmic trading? Is it expected, appreciated, a competitive advantage?
Back in late 2008 and through our involvement with the FIX technical committee, we saw the opportunities FIXatdl^SM afforded us as a business and the benefits to clients. So we started working on being able to adopt the protocol, as well as provide internal and client (broker) facing enrichment tools that would enable us to use FIXatdl^SM even more effectively. RealTick started to work closely with a number of key broker dealer partners in early 2009 to implement their equity algos using FIXatdl^SM. At that time the uptake was still fairly limited across the industry, but our partners were keen to work with us and together we deployed a number of new algorithms and refined the process along the way. The experience the brokers had was very positive – FIXatdl^SM allowed much of the workload around implementation, plus defining algorithmic enrichment screens and layout, to be simplified. Furthermore their new algos were getting out to their institutional clients much quicker. As a result the brokers could focus on creating new algos or customising existing ones and then deploying these to clients more efficiently. If you can see and exploit changes in a macro marketplace or region, or micro liquidity structure and then deploy a new algo potentially within days, that has to create a competitive advantage, for those providing brokerage services and traders seeking to optimize execution performance and investment strategies. For the major brokers, and certainly for RealTick, we believe FIXatdl^SM is now the de facto method to support algorithmic trading.
How do you use your FIXatdl^SMofferings as a distinguishing factor among your competitors?
One of the challenges vendors faced was how to fully leverage the potential of a comprehensive new protocol for clients. We wanted to ensure we and our partners had the ability to quickly and easily use FIXatdl^SM. So RealTick enhanced its existing complement of web based broker dealer tools, with a suite of purpose built screens that allow brokers to upload and view their XML files, verify FIX tags and descriptions, plus attach their own branded logo to the algo enrichment ticket. Importantly if the file does not conform to the FIXatdl^SM specification, those specific items and lines are highlighted to the broker, along with a brief description as to why, so the broker can quickly rectify the line and reload the file. It really becomes a quick and painless procedure, removing iterative development and testing cycles and enabling the broker to easily and proactively self manage the process of deploying new algo releases to clients, or for us to manage the entire process for the broker. Importantly for brokers and traders, via a robust Software-asa- Service deployment model these new algos are immediately visible and ready to use on the traders’desktop once tested and released.
What are the main issues you and your clients encounter when using FIXatdl^SM, and how would you like to see these resolved?
FIXatdl^SM was forged in the equity space and initially catered for commonly used order types. As liquidity access and markets continue to challenge investors who require enhanced execution capabilities, we will need to see FIXatdl^SM broadening its reach to include complex order types and linked trading strategies, such as pairs and spreads trades. As brokers and traders look for advanced functionality to be incorporated, the collective challenge is to ensure FIXatdlSM is able to accommodate the range of new functionality, markets and capabilities in a timely manner, while still maintaining the integrity of the FIXatdlSM schema and vision as a whole.
Where do you see algorithmic trading expanding; e.g. new trading arenas, asset classes, etc.?
With market volatility and structural changes likely to continue as part of the trading landscape for some time, it is fair to say algorithmic trading will continue gaining ground and usage. Liquidity fragmentation continues to create challenges and opportunities, with the deployment of new algorithms playing a central role for investors seeking to achieve better execution. A recent TABB Group study predicts algos will soon account for 35% of buy-side order flow in the US and similar growth trends we believe hold true for Europe. In addition we see increased algorithmic trading being adopted across the Asian markets, as well as in ‘newer’ regions and markets such as South America. In fact a number of our broker partners have been adding or expanding existing algo trading capabilities for clients using RealTick in these markets this year. Other areas of growth are the adoption of ‘low touch’ algorithmic trading for linked trades, such as equity pairs and spreads trading, as well as broader algo asset expansion in options, futures and foreign exchange markets. These trends still have some way to go and as brokers continue to innovate and FIX expands its capability to accommodate new requirements, we expect the development and uptake of algos will accelerate and broaden, to the benefit of brokers, vendors and traders.