Swaps Venues Adopting Communication Standards
September 4, 2012
The Fixed Income Connectivity Working Group said venues expected to operate as ‘swaps execution facilities’ are adopting common technical standards for trading.
Investment banks are adopting the standards, based on the Financial Information Exchange protocol, as operators of swaps trading facilities begin to register, under the 2010 Dodd-Frank Wall Street Reform Act and Europe’s Organised Trading Facilities requirements, in its own set of market reforms.
The working group’s mission is to create a set of global best practices for the trading of interest-rate swaps and credit-default swaps, using technical standards such the FIX Protocol and the Financial Products Markup Language.
A set of best practices was ratified by the FIX Protocol standards body in March 2012. Since then, the “overwhelming majority of swaps venues” have moved to adopt the open FIX Protocol and associated best practices for electronic trading of swaps, the working group said.
The list of adopters include BGC Partners, Creditex, Dealerweb, Eris Exchange, GFI Group, ICAP, iSwap, MarketAxess, SwapEx, Tradition Trad-X and Tradeweb.
The benefits include “easier integration,”’ greater efficiency and lower costs, the group said.
“This represents an important step forward towards the development of standardised communication between SEF’s and their users,’’ said Kevin Houstoun, Co-Chair of the FPL Global Technical Committee.
Thereference implementation is designed to meet these four requirements:
- Connectivity protocol must be based on the industry ratified FIX Best Practices for IRS & CDS
- Provide comprehensive coverage of the SEF workflows based on production-like data sets
- Provide reasonably good throughput so that business workflows can be tested in line with the user’s production expectations
- Provide simplified connectivity and low maintenance overhead for participants
These apply to two trading models: a central limit order trading book; and, a request-for-quote approach.