Electronic Trading of Swaps Getting FIX
September 14, 2011
A group of thirteen trading venues has joined the list of broker-dealers backing the creation of a new standard based on the Financial Information Exchange protocol for the trading of interest-rate and credit-default swaps.
The firms are Bloomberg; BGC Partners; Dealerweb, a unit of Tradeweb; Eris Exchange; GFI Group; Icap; ICE-Creditex; Market Axess; Phoenix Partners; Tradition; Tradeweb and Tullett Prebon. Another venue was not identified.The firms were cited in a statement issued on Thursday by Etrading, a London-based financial IT consultancy.
“Standardization of protocols in the trading landscape helps to promulgate an orderly and fair market access and is another demonstration of the fast response of trading venues and market participants to the mandate of our regulators and the need of our industry, “ says Yann L'Huillier, chief information officer for Tradition in the statement.
Francesco Cicero, head of e-trading for GFI, an interdealer broker which also operates an electronic trading platform for credit default swaps, says that his firm is testing the use of the FIX protocol with broker-dealers. The firm, which plans to become a swaps execution facility, had previously relied solely on their User Interface, called CreditMatch. “As the new regulations become clearer we want to make certain that our customers can communicate with us in the most efficient standardized fashion,” says Cicero.
The creation of the new working group of broker-dealers called the Fixed-Income Connectivity Working Group coincides with the pending requirement under the Dodd-Frank Wall Street Reform Act to require the trading of standardized forms of over-the-counter credit- and interest-rate derivatives on exchanges and so-called swap execution facilities.
The working group includes BofA Merrill Lynch; Barclays Capital; Commerzbank Corporates & Markets; Credit Suisse; Deutsche Bank; Goldman Sachs; HSBC; J.P. Morgan Chase; Morgan Stanley; Royal Bank of Canada, Royal Bank of Scotland, Societe Generale and UBS.
Their goal: to reduce the costs for fund managers and broker-dealers to link with trading venues by eliminating customized interfaces. The group will first work with broker-dealers and then asset managers. Although fund managers often rely on the FIX protocol to send trade orders for fixed income, interest rate swap and credit default swaps, they use customized tags.
Those tags reflect new specialized data fields which are either proprietary to that fund manager or created by the trading venue. By contrast, broker-dealers more often use proprietary application programming interfaces, says Sassan Danesh, managing director of Etrading, a London-based technology group working as the FICWG’s consultancy.
The group’s guidelines are expected to be officially endorsed by FIX Protocol Limited, the trade group promoting the FIX standard, and the Financial products Markup Language group, the trade group promoting the use of FpML protocols in the over-the-counter derivatives market.