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Messaging Fit for FIX: Was IM Made to Order?
October 1, 2004
The popularity of instant messaging on Wall Street has soared in the past couple of years, transforming the way brokers communicate with each other and with their clients, for both good and ill. By taking on compliance fears, a new IM product may now be transforming the way they trade.
Some smaller buy-side firms without access to an electronic order routing system are already sending in orders over IM, causing compliance headaches for the sell-side firms and forcing the sales brokers to rekey the orders--possibly introducing further errors into the process.
"Large clients are now sending their orders to us
via FIX," said Ken Dengler, managing director and head of trading
for Soleil Securities, a New York City-based brokerage with 60
employees that prides itself on its ability to aggregate
independent research.
But not all firms can afford the technology.
"Smaller clients would be sending them telephonically and via instant messaging," Dengler said. "Instant messaging is not always the most accurate way, and there are supervision issues, documentation. Due to the compliance issues, we're very reluctant to take orders over IM; we would prefer that people pick up the telephone and confirm an order."
This fall, Soleil will join about ten other sell-side firms and install IMTrader, an instant messaging interface for FIX traffic that allows buy-side firms to send orders electronically without buying an order routing system.
IMTrader will monitor the company's normal IM traffic and is smart enough to recognize when an order is actually being conveyed, said Dengler.
Some 500 traders at over 150 buy-side firms now use IMTrader-a quick download from Pivot Solutions-to send orders electronically to 10 sell-side firms. Sell-side firms have to pay for the product and spend a few weeks installing it.
For buy-side firms, IMTrader offers a free, lightweight virtual order management system that converts instant messages into FIX-compliant orders. IMTrader also processes trade confirmations and generates reports.
Today, buy-side firms can only send electronic orders to those sell-side firms that are IMTrader customers. And they can only get IMTrader if one of their brokers is a paying customer. Next year, they will be able to send those order to any broker that takes FIX messages-but they will still only be able to download the product if one of their brokers has paid for it.
Soleil gets two major benefits from IMTrader, said Dengler. The first is that more trades will come in electronically, reducing errors and speeding up the trading process. The second is that IMTrader's virtual order management system (OMS) allows Soleil to help clients that aren't large enough to build or buy their own FIX-compliant OMS.
"This is a quick, easy solution that a few years ago would not have been available," he said. "It also keeps us competitive with the large bulge-bracket firms."
Soleil and its clients currently use instant
messaging extensively. The firm uses all the popular public IM
networks, but AOL Instant Messenger carries the bulk of the
messages because it is the de-facto industry standard, Dengler
said. For instant messaging compliance supervision, Soleil uses
FaceTime.
