Emerging Markets Embracing FIX
August 25, 2008
With electronic trading moving well past critical mass in developed countries, FIX Protocol Ltd. (FPL) is encouraging adoption of the financial information exchange protocol in emerging markets in Asia, Eastern Europe and Latin America.
The FIX protocol, which is the global standard for buy-side-to-sell-side communications in the equities markets and is increasingly used in fixed-income, listed derivatives and foreign exchange transactions, "is truly an industry-driven messaging standard," says Scott Atwell, co-chair of FPL's global steering committee. The organization currently has 200 member firms.
Last month, FPL introduced a new membership category, allowing institutions in 25 emerging markets to join for a reduced fee, provided they meet certain criteria. "This was in direct response to feedback we received from firms within emerging-market regions eager to join and participate more fully in advancing the adoption of the FIX protocol," says Atwell.
There is significant interest in FIX among the lesser developed countries, particularly as they seek to open and expand their markets internationally, according to Peter Gaffney, president of New York-based agency brokerage Axes, which offers access to more than 250 exchanges through broker partners in over 90 countries, including many emerging markets. "As these regions look to move from being known as the debt markets and more for equity-driven products, the FIX protocol is essential," he notes. "It will enable them to communicate and interface with exchanges and other marketplaces."
Gaffney says that his firm has seen increased interest in FIX adoption even amid recent volatility in the global markets.
"When I was in South Africa a couple of years ago, the large number of hedge funds based in that area was driving trading volume," says Atwell, who is also head of FIX connectivity at Kansas City-based American Century Investments. "I've been to Shanghai a couple of times and China has been on a growth spurt. The Chinese regulatory body ... has been advocating, as part of technology modernization at the exchanges, the adoption of Step," or the FIX-based securities trading exchange protocol. In Brazil, many firms are already using FIX to trade with parties outside of the country, he adds, "and the market centers themselves have been key adopters and proponents of the use of FIX."
FPL has been instrumental in establishing FIX as "the standard" in new markets, says Greg Orsini, VP of connectivity solutions at Stockholm-based Orc Software. "FIX has been a great democratizer in the markets that it's used in," he says. "By having everyone use the same standard, it allows new entrants and new market participants to easily adopt a single standard and start communicating with everyone else in the community. This ultimately drives volumes higher and higher, which is good for practically everyone." As an example, Orsini cites the Brazilian Mercantile & Futures Exchange's move to adopt FIX, which "is going to drive higher volumes in Latin America and bring more participants into the market."
Atwell, who from 1997 to 2005 was co-chairman of FPL's global technical committee, sat down recently with Securities Industry News markets reporter Dawn Kissi to discuss the organization's new initiatives and the directions he sees the standard going. Active in several FIX committees and working groups, Atwell has been co-chair of the global steering committee since April 2004. He joined American Century Investments in August 1994 and developed the FIX connectivity system it launched in 1996.
