Funds managers report big increase in FIX usage

A survey of 20 major funds managers by consultant JOHN DIBIASE has revealed that FIX is close to becoming the dominant messaging standard for electronic trading, as dealers (or at least the order management systems they use) supplement or replace standards such as the long-dominant IRESS. The use of Financial Information Exchange (FIX) for electronic trading has been regarded as a necessary investment in most overseas markets but historically has had a low take-up by Australian investment managers. Shoreline’s 2010 survey has found electronic trading via FIX is well established and expanding compared to the 2008 survey: • Nine of the 20 participants use FIX for electronic trading – a significant increase from the three users in the 2008 survey • Asset classes traded electronically has expanded from equities only in 2008 to fixed interest, FX, and derivatives • Managers are taking advantage of higher value FIX functions such as allocations compared to simple order flow only usage in 2008 • Business drivers for FIX usage remain the same as 2008 – cost reduction and risk reduction

The Shoreline 2010 FIX Survey Shoreline recently surveyed 20 Australian investment managers, representing a cross section of the investment management marketplace, to gauge the growth of FIX usage in the Australian market and understand the drivers for its use. A similar survey was conducted in 2008 and provides a baseline to measure the change in FIX usage. FIX is an industry-driven messaging standard used in financial markets for the electronic communication of trade-related messages. Electronic trading via FIX is commonplace in the US and Europe and standard in Asia. FI X usage has significantly increased The latest survey demonstrates FIX electronic trading has dramatically increased over the two years since the 2008 survey. Nine of the 20 participants use FIX for electronic trading, a significant increase from the three users in the 2008. In addition, two of the non-FIX users are planning to implement FIX in the coming year, which will push FIX usage past 50 per cent of the mangers surveyed. In 2008 four managers expected to implement FIX in the coming year, three of which did in fact implement FIX.

The increase in FIX usage is a result of a number of factors. The continued push of Australian managers into international asset classes and global markets complicates the trading environment. A FIX electronic trading solution can efficiently cope with the complexities, including increasing trading partners and destinations and greater trade volumes. Sourcing and implementing a FIX solution has also become easier. FIX capability is a standard out-of-the-box function for all of the main order and execution management systems. The provision of FIX electronic trading as a managed service by many of the vendors has further reduced the investment and effort required by managers to deploy and operate an end-to-end FIX solution. Maturation of FI X usage The 2008 survey highlighted the immaturity of FIX usage in Australia. Not only were user numbers low but also electronic trading via FIX was limited to primarily international equities, with one user trading domestic equities. The 2010 survey demonstrates FIX users have moved beyond the ‘low hanging fruit’ of equities electronic trading (FIX equity trade flow is the simplest to implement and has the widest support) into other asset classes. International and domestic equities remain the most widely traded asset class, followed by derivatives, FX, and domestic fixed interest. The only FIXcapable asset class not traded is international fixed interest.