FIXatdl: Algo Solution or Just More Custom Tags?
June 23, 2008
FIX Protocol Ltd. (FPL) has released a new version of its XML-based specification for advanced algorithmic trading support, four months after it became a fully approved standard.
The FIX algorithmic trading definition language (FIXatdl), an effort to bring standardization to the distribution of an ever expanding number of proprietary algorithmic strategies--and expand the FIX protocol franchise--allows firms to control how their order types are expressed and transmit them via FIX. Version 1.1 offers advanced validation rules, making the process far more automated, according to FPL.
At the Securities Industry & Financial Markets Association's (Sifma) recent technology conference in New York, John Goeller, co-chairman of the FPL Americas regional committee and director of portfolio and automated trading services at Merrill Lynch & Co., said that when it comes to the algorithms that "broker-dealers offer to their clients, distribution becomes a challenge. How do I get my product--our algos--integrated into their platform? A typical way we do that is code up a [FIX] specification defining tags and strategies, then ship it off to the provider. After that, development, testing and certification takes place. The biggest problem associated with that is the time to market."
Coping with the universe of user-defined tags was difficult enough with the traditional tag-equals-value FIX protocol--what will it be like when FIXatdl users start to create their own tags? "It's going to be a challenge to get everyone to agree on what an algo should look like," said Goeller. In the future, "algos are going to have to become household items" like VWAP, the commonly used value-weighted average price algorithm, he noted. "I think you can eventually standardize them, but I think there's a competitive aspect to algo trading which requires certain functionality be in certain strategies."
The tension between those seeking to standardize algorithms and users who want to solve problems in a short time has become part of the landscape. "We formed an industry group under FPL to think about this problem," Goeller said. "You could say, Let's standardize all tags associated with algos,' but the market is moving very fast. So we said, Let's standardize the way brokers submit information to these vendors and use a standard XML format to do that.'"
"That's what FIXatdl does," explained Goeller. "It encodes your strategies in a common format" that suppliers of order management systems (OMS) and execution management systems (EMS) can accept like configuration files, shortening the time to market and reducing ambiguity.
Process Standardization
Yuri Salkinder, director of equity technology at Credit Suisse and a member of the FPL global technical committee, stressed that the process of creating new algo tags is itself being normalized. When FPL releases tags "it's part of a cycle, where we work with around 40 different vendors and certify their system," said Salkinder at the Sifma conference. The extent of standardization is not clear, however. "Pretty much every client requires some level of dispensation," Salkinder said. "Each algo is not the same to every client."
FPL says that several OMS vendors are currently developing software that supports the latest version of FIXatdl and are expected to announce their offerings shortly. An open-source product is also available for download on SourceForge, a code repository Web site. And FPL has been encouraging broker-dealers to publish their electronic trading capabilities for the spec.
