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Risk Management

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FIX for Post-Trade Gains Traction: How Far Will It Go?

A group of heavyweight asset managers has collaborated on a solution for non-US trade confirmations and affirmations that is fueling interest in FIX for post-trade use as an alternative to Omgeo's Central Trade Manager.

A big leap?
It was not a big leap. Capital Group already used FIX in the electronic execution process to send indications of interest and block trades, all the way through allocations to the brokers. "Once the buy side traded a block, it sent the allocations at the individual account level. But that's where it stopped," Vallone said. FIX 4.2 covered allocations but not confirms and affirms. The idea was to "leverage what we were doing in the allocation space over to confirmations and affirmations."

Large asset managers like Capital Group also performed local matching of the trade details sent on the broker's confirm, as compared with the central matching model. "It's a radical shift to go from local matching to central matching." Capital Group uses an internally developed trade processing system to take in the broker confirmations and send back the affirmations. "CTM is more of a central utility model, where we would send data out, they would perform the matching in the utility, and then we would have to carry data back in to conduct the rest of the downstream matching. All of these downstream processes would be reliant on pulling that back in."

Asset managers saw the operational efficiency of using the execution ID all the way through the post-trade process. Andy Clark, director of product management at Investment Technology Group in New York and a member of the FIX Global Post-Trade Working Group, said the buy side "expressed interest in the ability to link IDs from an execution perspective with IDs that could be used for post-trade." They also wanted to use standard messaging, and some felt that "having alternatives would be economically interesting."

Cost considerations
With Omgeo CTM, the buy side has to pay for each confirmation message. Since FIX is a protocol, there is no cost for sending messages. Once participants shift to FIX, those fees disappear. Ignatius John, CEO of Alpha Omega Financial Systems, said the buy side can save a lot of money, because it is using the current FIX infrastructure to send post-trade messages, and more than 95% of the trades go through FIX. Also, "it's much more efficient because it ties through the straight through processing solution." The only thing the brokers need to do is to establish another FIX 4.4 session, which costs only about $200 a month. "That's peanuts compared to what they are spending."

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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