The Global FIX

Congratulations to Eric Karpman of Bear Stearns for his election as the co-chair of the Technical Subcommittee of the Global Fixed Income Committee (GFIC). The GFIC looks forward to his active involvement. There are several important projects which he will help lead including the prime brokerage initiative. Special thanks to Joe Verdicchio from Lehman Brothers who also volunteered to serve as co-chair.

FIX Protocol Ltd. and The International Primary Market Association (IPMA) have signed a Statement of Understanding (SOU) outlining a collaborative approach to developing a common industry protocol for the distribution and trading of primary products within the global securities marketplace.

Under the agreement, FPL and IPMA will work together by sharing market expertise and collaborating in the extension of FIX to the fixed income new issue marketplace. Representatives from both organizations will jointly serve on the GFIC to further expand the FIX Protocol and extend it to new issue invitations and book building.

FPL and IPMA will utilize the IPMA Match XML schema as the basis of technical discussions and will perform a ‘gap analysis’ relative to the FIX Protocol. The SOU between FPL and IPMA can be found at http://www.fixprotocol.org/documents/1223/FPL%20and%20IPMA%20Statement%20of%20Understanding.pdf

The IPMA’s (www.ipma.org.uk) Statement of Understanding with FIX Protocol follows similar SOUs with The Bond Market Association (www.bondmarkets.com) the International Swaps and Derivatives Association’s FpML (www.isda.org) and SWIFT (www.swift.com). These cross association agreements function as a web of alliances that help integrate the FIX standard with as many industry and market practices as possible.

Running Different Versions of the FIX Protocol from One FIX engine

by Martin Koopman – Cameron Systems, Co-Chair, Americas FIX Committee

If you are going to use FIX for fixed income trading, FIX protocol version 4.4 has application messages and fields to support the process. The majority of this support was added in 4.4. The alternative approach is to "hack" a previous version of the FIX protocol by adding user defined fields so that it supports the process and hope that other people will adopt the same process. In the long term this is likely to incur much higher costs.

Nearly all major FIX engines support running different FIX protocol versions from 4.0 to 4.4 across multiple sessions. This has been a feature that dozens of organizations have had in production for years.

For example, this would allow a fund manager to connect to one broker and trade equities using FIX 4.2, while also from the same fix engine connect to a different broker to receive post trade fixed income messages using FIX 4.4. Or it would allow a broker to connect to one fund manager using FIX protocol version 4.2, and with the same fix engine connect to another fund manager using FIX protocol version 4.4.

The primary difference between FIX version 4.0 and later versions is that the later versions have dozens of new message types and new message fields, primarily to support different asset classes. FIX 4.4 in particular has many new message types and fields to support fixed income.

The FIX engine is only transmitting the data between an order management system/application and the counterparty. Therefore support for these new fields in a later FIX version has to be created within the order management system. The order management system has to have the ability to create these fields, and recognize them when they are received from a counterparty.

With a vendor order management system, the organization will be dependent on the order management system vendor to provide support for this new FIX version. With an in-house order management system, development work will need to be done. This development work can be minimized by adding support for the minimum number of application messages and fields required to support the trading desired.

Some FIX engines are able to manipulate messages. This is sometimes called ‘message translation’. In short this means they can take data for example from a field in a FIX 4.4 message, and put that data into a user defined field in a 4.2 message. This would be done if the 4.4 field does not exist in 4.2. Message translation can be of benefit if an order management system supports an older FIX version and has much flexibility with user defined fields, but does not support later FIX versions. It is not a cure all however as the order management system still has to be able to create and recognize these FIX fields.

An analogy may help. If you are speaking English with a vocabulary of 100 words (FIX 4.0), and I have a vocabulary of 2000 words (FIX 4.4), no manipulation of words or translation is going to help us to communicate. The person with the smaller vocabulary simply has to learn the minimum words necessary to understand what the person with the larger vocabulary is saying.

First South African FIX Conference

The first South African FIX Conference will be held in Cape Town on Wednesday, March 9th 2005. The conference will cover initiatives within the FIX space, how FIX is being used internationally, and how FIX relates to the South African financial services industry. Discussion will include how to use FIX allocation and confirmation messages to support a wide variety of business models, and how FIX can be used across the whole spectrum of trade processing activities. A representative of the Bond Exchange of South Africa will be making a presentation.

For further information please contact

FPL Canadian Electronic Trading Conference 2005

The FPL Canadian Electronic Trading Conference 2005 will be held June 7th at the Toronto Board of Trade. Securities professionals will come together to focus on enhancing securities processes through the use of electronic trading and the FIX Protocol as a key enabler. http://www.fixprotocol.org/fplcanada2005

The US FIX

Learning more about the DTCC’s Real Time Trade Matching (RTTM) system and its flow-through of reporting data to the MSRB and the NASD’s TRACE system were the subject of the February Global Fixed Income Committee meeting. The meeting participants briefly discussed the best methods of integrating FIX messaging or FIX data formats into these utilities. This integration could serve as a true framework for straight through processing for the US corporate, municipal, MBS, government and agency markets.

DTCC’s RTTM presentation

MSRB’s presentation

Hold the date – Learn FIX is a seminar to quick start using FIX and will be held on June 14th at the Bond Market Association offices in NYC. A morning session will cover the basics of implementing FIX and the lunch session will highlight the certification process. Participants can attend one or both sessions. More details to follow.

The EURO FIX

Scandia conference - The event in Stockholm was a great success for FIX in the region with more participants than expected attending the full day forum. Over 100 participants attended the meeting sharing their ideas and solutions around FIX. The presentations were well received and generated interesting discussions. Silvio Oliviero of JP Morgan made a presentation regarding FIX for fixed income which you can see here http://www.fixprotocol.org/documents/1280/FIX%20Status%20Update%20-%20Stockholm.ppt

To see the full conference materials
http://www.fixprotocol.org/documents/1172/Scandi_Presentations_050119.zip

The development of a European “proof-of-concept” program for fixed income is underway. The intention is to select a UK or European sell-side and a buy-side firm to volunteer to set up a beta program for the FIX protocol. The four sell-side firms leading the development are Citigroup, JP Morgan, Lehman Brothers and Merrill Lynch. The buy-side firms will be announced soon.

The Certification FIX

Lehman Brothers is the first firm to be certified under the FIX Protocol Certification Program. See here http://www.fixprotocol.org/pages/991/FIXCertified%20Firms.htm

The next GFIC meeting will be held on Wednesday, March 16 at 12:30 pm EST.