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Equities Basic Order FlowAs the original functional core of the FIX Protocol, basic order flow for cash Equities is well supported in all versions of the protocol discussed here. Having said that, the protocol continues to evolve in areas such as particular market support (for example: The STEP 1.0 Extensions provides initial support for the use of FIX in Chinese equities markets.). Program TradingThere are two distinct ways to handle portfolio order flow over FIX:
Although List Orders are available in version 4.0 of the protocol, they function in a different manner to later versions. Version 4.2 of the protocol incorporated a complete re-working of portfolio trading support, with particular changes to the List Order messages and workflow. Algorithmic Trading ExtensionThe Algorithmic Trading Extension provides a more complete and flexible way of specifying and identifying strategies for order execution.Collective Investment Vehicles Basic Order flowFIX messages can be used to support order initiation / confirmation and to issue settlement / Registration Instructions for open-ended Collective Investment Vehicles (CIVs) known variously as Mutual Funds, Unit Trusts, Managed Investments. Open Ended Investment Companies (OEICs), Undertaking for Collective Investment in Transferable Securities (UCITs) etc. Futures & Options Basic Order flowVersion 4.0 of the FIX Protocol is not suitable for Financial Futures & Options (FF&O) Trading but the other versions all have varying levels of support for FF&O business. Support for FF&O trading in version 4.1 of the protocol is rudimentary. Version 4.2 of the protocol builds on the capabilities provided by 4.1, introducing additional fields that make support for give-up trades easier. FIX 4.3 introduces further additional fields specifically to support FF&O, with specific improvements in the areas of multi-leg instrument support and security identification. Version 4.4 of the protocol includes specific actions to bring FIX in line with the standards of the Futures industry committee and incorporates work done by the FIX Derivatives working group. It provides the most complete implementation of the protocol yet by providing support for listed derivatives clearing from trade reporting and allocations through positions maintenance and reporting. FIX 5.0 contains a listed derivatives party role extension which provides additional party roles for carrying session-level identifier in the parties block which are useful to clearing firms and other parties receiving trade reports. Fixed Income Basic Order Flow
The first major version of the protocol with extensive support for Fixed Income is 4.3. Significant work was undertaken to bring FIX usage in line with the guidelines established by the Bond Markets Association (BMA). Workflows for Fixed Income trading are significantly different from those for Equities. However, gap analysis determined that mappings were possible. For example, Offerings could be supported by the FIX IOI message, whereas Inquiries and request for tradable Bids or Offers could be handled by the FIX Quote request/response messages. What we might call basic order flow, i.e. client sends either a New Order – Single or New Order – Multileg and receives Notifications of Execution in return is well supported in versions 4.3 of the protocol onwards. The same can be said for allocations (with both pre- and post-trade methods supported via the standard FIX allocation fields/message respectively). BackForeign Exchange Basic Order Flow
A standard means of using the protocol for FX instruments was described in FIX 4.2 and has subsequently been carried forward into later versions. In FIX 5.0, the FX Phase 1 Extension covers Spot, Forwards, FX Swaps and vanilla FX OTC Spot Options. The functionality for each of the instruments covers Streaming prices for spots and outright forwards, Quotes for spots, outright forwards and FX swaps, Orders, Executions and Trade Capture (FX OTC Spot Options only) BackAdvertisementsBasic Advertisement functionality for cash equities is provided in all versions of the protocol discussed here. Fields to support Futures & Options are not present until version 4.1 of the protocol. Support for Fixed Income Advertising is added in version 4.2. IOIsAs with most other functionality IOI support for cash equity product is strong in all recent protocol versions. Fields to support Futures & Options are not present until version 4.1. Fixed Income (High Grade and High Yield Corporate Bond) IOI support was introduced in version 4.2. QuotesQuotes can be requested/supplied on specific securities or forex rates. However, Futures & Options and Fixed Income quotes are not supported until version 4.1. As with most other areas of functionality, Fixed Income quotes only really receive rudimentary support from version 4.2 of the protocol onwards. Mass Quoting, to address the needs of listed derivatives markets, was add in FIX 4.2, along with additional messages for quote management. The concept of a tradable quote was first introduced. Refinement and definition of indicative quoting, tradable quoting, and restricted tradeable quoting models are added to FIX 4.3. The suite of quote messages was expanded to support Fixed Income pre-trade negotiation. Multi-leg OrdersThe capability to transmit Multi-leg orders was introduced in version 4.3 of the protocol. Their use is documented in Volumes 4 and 7 of the specification. NewsBasic News message functionality is available from version 4.0 onwards, although specific fields for Futures & Options were only added in versions 4.1 and 4.2 respectively. Email functionality has developed in parallel with that of the News message, with additional fields added for Futures &Options in 4.1/4.2. Although, due to its largely free-text bases functionality, this message type could support any product type from version 4.0 onwards, the addition of these product-specific fields in later versions greatly clarifies usage. AllocationsAllocations can be performed both pre- or post-trade. Post trade allocations are supported in the form of a separate FIX message type, whilst pre-trade allocation is achieved by sending allocation details on the order message itself. Pre-allocation functionality was not introduced until FIX 4.2. Pre-trade allocation is much more commonplace in the program trading community than it is in block trading hence the limited support indicated in the matrix. For the purposes of pre-trade allocation, a repeating group covering account and number of shares was added to the order message in 4.2. Cross border allocations support was introduced in version 4.1, as was support for allocating Futures & Options trades. Support for Fixed Income was introduced from version 4.3 of the protocol onwards. FIX 4.4 saw the introduction of a common allocation model across multiple asset classes for both cash and listed derivatives instruments. This work is on-going driven by the FIX Allocation Working Group and the FIA Extensions for Clearing Working Group. In FIX 5.0, the Allocations for Options Extension provides the ability to represent the open or close disposition of a trade or position on both the give-up and carry firm side of the allocation. Confirmations / AffirmationsThe capability to transmit Confirmations and Affirmations was introduced in version 4.4 of the protocol. Their use is documented in Volumes 5 and 7 of the specification. Market DataThe capability to transmit market data via FIX was introduced in version 4.2 of the protocol. In FIX 5.0, the Market Data Optimization Extension introduces changes to support book management best practices. The market data specification has also been broadened to support a wider array of business practices and processes in new markets. Changes to support Trading Session Status Reporting and Trading Timetables have also been introduced. Finally, changes have been made to support Foreign Exchange requirements for streaming prices. Settlement InstructionsUsed to transmit Investors payment details to the fund manager where the Intermediary does not settle trades. Registration Instructions and ResponseUsed to transmit Investors registration details to the Fund manager, allow compliance checks and opening of the correct type of account. Trade ReportingTwo additional messages have been added in FIX 4.4 allowing sell-side firms provide details of completed trades to an external entity not involved in execution of the trade. Further details of these two message types (Trade Capture Report request and Trade Capture Report) can be found in Volume 5 of the FIX 4.4 specification. Trade Reporting was further extended for use in reporting between clearing houses and clearing firms. In FIX 5.0, the Trade Capture Reporting process has been substantially elaborated and now provides a detailed accounting of a number of different trade reporting models that are common in the equities and listed derivatives industry. Collateral ManagementFive new messages types (Collateral Request, Collateral Assignment, Collateral Response, Collateral Report, and Collateral Inquiry) were introduced in FIX 4.4 to comprehensively support 2-party and 3-party repo and, to an extent, securities lending collateral management. Details of these message types and its usage can be found in Volume 5 and the Fixed Income section of Volume 7 of the FIX 4.4 specification. In FIX 5.0, the Collateral Reporting Extension provides support for a risk-based margining model as used in the listed derivatives industry. The enhanced model allows collateral to be deposited at the clearing house in order to satisfy clearing margin requirements. Security and Position ReportingFive new messages types (Position Maintenance Request, Position Maintenance Report, Request For Position, Position Report, and Assignment Report) were introduced in FIX 4.4 to comprehensively support listed derivatives clearing and are their usage can be found in Volumes 5 and 7 of the FIX 4.4 specification. In FIX 5.0, reporting of corporate actions and the need to adjust impacted positions and securities are addressed in this extension. Additionally, multiple new messages for Security and Position Reporting have been added in this extension. Transport Independence and Application VersioningThe Transport Independence Framework separates the FIX session layer from the application layer. This enables firms to utilise the business functionality provided by later versions of the protocol with their existing implementations. This significantly reduces the financial investment required to develop new releases while allowing FIX to be used by a wider audience, from the most demanding low latency users to those requiring massive scalability. Additionally the Transport Independence framework will allow FIX application messages to be carried over other session transports such as web services and MQSeries, providing the financial community with even greater flexibility. Regulatory Compliance
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