George Rosenberger, Head of ConnEx at ConvergEx, discusses the need for outsourced FIX connectivity and how it can be integrated and beneficial to broker-dealer infrastructures.
The Need for Outsourced Connectivity
Connectivity-related expenses are probably the second highest expense item for broker-dealers behind execution-related expenses. Most broker-dealers struggle to keep tight cost controls on their own FIX connectivity due to lack of transparency, lack of proper connectivity tools and lack of FIX/vendor expertise.
Benefits of Outsourced Connectivity
Every broker-dealer can benefit, in some way, from outsourcing. Whether it’s helping to reduce infrastructure expenses (such as staff, hardware and telecommunications) or creating greater efficiency and providing for the ability to focus on their core business, outsourcing connectivity makes sense for everyone. Larger firms with in-house technology teams can employ an outsourced FIX connectivity provider to supplement and support their staff for special projects. Small firms that do not employ their own IT staff can outsource this function entirely.
Implications of Implementation
The initial cost of conversion to outsourcing is minimal and any associated costs are normally offset by additional savings realized within two or three months of the conversion. The key is to find an outsourced FIX connectivity model that allows for rapid deployment. Customers need to be live in weeks rather than months. Outsourcing FIX connectivity to a platform-neutral provider means that you can easily swing your inbound FIX connectivity from one provider to another without any repercussions.
Effect on Latency
Most customers will not even notice latency when using a gateway that certifies directly into each customer’s sell-side order management system (OMS). Because this type of solution can replace other types of FIX servers or gateway components, the latency differential can actually be a positive experience, in some cases, depending upon the customer’s current FIX configuration. Also, the added benefit of using dynamic rerouting of order flow for resiliency or real-time message customization makes such models compelling regardless of any latency gaps.
Safeguarding and Segregating Trading Data
It is important to ensure that customers receive the benefit of comprehensive information security policies and procedures, and yet don’t feel disconnected from their connectivity data. While some infrastructure can be shared within a software solutions firm such as telecommunications, routers and firewalls, the primary infrastructure should be managed independently from any broker-dealer. FIX messaging can be isolated by providing each broker-dealer customer with a dedicated FIX interface, ensuring that their order flow is kept segregated and completely confidential. All application data security should be tightly controlled and monitored with a security and access control system that restricts data access.
Outsourced FIX Connectivity:Implementation and Integration
