FIX 5.0, One Year On
Adoption picks up as cross-asset messaging standard evolves
November 19, 2007
FIX, or the financial information exchange, protocol, which began life in 1992 as a communications framework used by Fidelity Investments and Salomon Brothers for equity trading, has evolved into the global standard for buy-side-to-sell-side messaging for equities and, increasingly, other asset classes.
The 5.0 version of the standard--the first whole-number upgrade since 1996--rolled out in October 2006 and features transport independence, allowing legacy versions of FIX, which were developed for specific asset classes, to be used in the same session. That release followed a decade in which four point updates to FIX showed a growing emphasis on asset-class expansion: 4.2 added support for foreign exchange and indications of interest for high-yield and high-grade corporate bonds; listed derivatives, swaps and multi-leg instruments support came in 4.3; and U.S. Treasuries, agencies, municipal bonds and repos in 4.4.
Kevin Houstoun, co-chair of the FIX Protocol Ltd. (FPL) global technical committee (GTC) with Matt Simpson, associate director of enterprise architecture at CME Group, wrote one of the first FIX engines for a European broker-dealer while working in emerging technologies at Robert Fleming & Co from 1996 to 1999. After leaving the London-based firm he joined the former Salomon Brothers' European equity trading team and in 2005 became a consultant for HSBC Investment Bank.
Houstoun, who also leads FPL's repository and Web services working groups, is director of Rapid Addition, a three-year-old software provider in London that designs financial messaging and workflow tools such as ShortCut, which allows for interoperability across different versions of FIX. He recently discussed the state of FIX 5.0 adoption and the standard's future with Securities Industry News standards editor John Sandman
How has the industry reacted to the FIX upgrade? FIX.5.0 is being implemented particularly widely in the exchange community. As with any release of FIX it takes time for the industry to tool up to take full advantage, and we are midway through that process. Transport independence has led to a lot of discussion and there will be an education and marketing drive to ensure that people have a consistent understanding of what it is, the benefits it can deliver and how it may be implemented.
Does FIX 5.0 address the proliferation of alternative trading systems and dark liquidity pools? FIX 5.0 is helping the industry deal with an unprecedented number of execution venues. This version of the protocol provides support by lowering the cost of access to each of these pools. But we have to ensure the consistent use of FIX standards in the sell-side-to-market-infrastructure space. It's going to be a key challenge for the next couple of years.
Are the Fast, or FIX adopted for streaming, protocol and FIX for Web services going to find broader usage because of 5.0? I think so. FIX 5.0 will help with the use of FIX over other transports. One of the first implementations I became aware of related to the use of FIX 5.0 messages over Web services in the post-trade, pre-settlement space.
Is there a sense that, in terms of asset classes, the protocol has reached as far as it can? A key area of focus for FPL is the encouragement of FIX adoption across the fixed-income, derivative and foreign exchange markets. Keep in mind that the adoption of FIX by asset class differs significantly by geography and the overall level of automation within the markets concerned. Within more-advanced markets we are witnessing growing adoption across the asset classes as firms leverage the experience gained within their equities implementation and are able to expand the benefits of automation, cost reduction and transparency across the board.