Encouraging Enhanced Transparency
FIX Protocol Ltd (FPL) has updated its recommended best practices for execution venue reporting, a set of guidelines designed to provide greater transparency for buy-side clients about where and how their orders are executed by their brokers.
The guidelines were originally produced to address the need for greater consistency and clarity in execution reporting. The revisions provide greater insight for firms trading on European equity markets.
The guidelines focus on requesting sell side firms to ‘tag’ their trades with specific details using FIX. These ‘tags’ are designed to provide the following information in a consistent format:
• Venue or exchange on which the order was executed
• Unique identification of markets, including market segments where it is appropriate to distinguish between lit and dark order books
• Whether the order was executed as a result of having traded passively by posting liquidity, or aggressively by taking liquidity
• Whether the trades were executed on an agency or principal basis
To view the guidelines please visit: www.fixprotocol. org/documents/6685/ FPLBuysideExecVenue_May2012_1.pdf
Commenting on the guidelines, Guy Sears, Director at the Investment Management Association said,
“We welcome all industry initiatives designed to provide the buy side with greater transparency over how and where their orders were executed. As the equity markets become ever more complex, algorithmic trading strategies are increasingly used by brokers in the quest for best execution. Buyside firms need to understand how their liquidity interacts in the markets. I hope that firms which adopt these best practices will find them of real value.”
Commenting on the enhanced guidelines, Brian Lees, Co-Chair of the FPL Buy-side Execution Venue Working Group and Manager of Application Development at The Capital Group Companies stated,
“The buy-side members of FPL have expressed a clear appetite for greater clarity and consistency in reporting from their brokers. Working with members in different markets globally we have been able to update the guidelines so they deliver even greater insight to the buy-side community.”
Jim Kaye, Co-Chair of the FPL EMEA Business Practices Subcommittee, and Director, Product Development, European Execution Services, BofA Merrill Lynch said,
“As a member of FPL, BofA Merrill Lynch, has been actively involved in developing the guidelines so they can be used more effectively for trading in markets such as Europe, and we feel the increased insight they will present to the buy-side will offer tremendous benefit. Not only will this enable firms like ours to have more strategic and compelling discussion about trading strategies with our clients, but also help us adapt our algorithms and trading strategies accordingly. Greater knowledge and understanding can only serve us all well, particularly in these times of lean liquidity.”
