Post-trade FX activities have been dramatically simplified by the FIX interface, allowing sell-side participants to navigate challenges such as liquidity fragmentation and to reduce total cost of ownership (TCO).

• The FIX protocol has been widely used in equity and fixed income, but is now increasingly popular, and powerful, in the FX world.
• Recent FX developments, such as MiFID II and the Global Code of Conduct, are driving industry-wide, post-trade trends.
• Banks of all sizes are using FIX to navigate increased liquidity fragmentation, reduce their TCO and meet complex compliance requirements.

As the largest financial market in the world, foreign exchange (FX) trading boasts a diverse selection of execution venues which have lowered transaction costs while increasing market liquidity and participation.

However, structural changes in recent years have reduced the depth of available liquidity and created greater market fragmentation. As a result, obtaining firm and tight data on trade executions, bilateral trading agreements, trading venues and pricing is challenging to nail down.

This is not only difficult for FX traders.

The middle-office, back-office and compliance teams also need to efficiently access and share FX trading data for risk management, compliance and counterparty processing. However, for many firms, gathering the right data and securely retrieving it is a huge challenge.

Learn more about Foreign exchange analysis and trading platforms from Thomson Reuters

Simplifying the FX trading lifecycle

Once participants trade on those platforms, downstream position keeping and risk management systems need the right trade information in real time.

In addition, compliance needs to be able to view conversational deals, confirm orders as agreed, see real trades (tickets), and honor obligations.

Designed to capture notifications for trades executed on broker networks, bank platforms, ECNs and FX venues globally, Thomson Reuters Trade Notification (TRTN) is one of the FX industry’s largest trade notification networks and processes millions of messages each month.

Increasingly, participants are adopting the hosted Financial Information Exchange (FIX) interface to connect their downstream systems to TRTN.

The FIX protocol has been widely used in the equity and fixed income spaces for years. However, it is now becoming increasingly popular, and powerful, in the FX world as it enables consolidation into a single pipe.

This encrypted, confidential trade data means it’s immutable and free from potential manipulations.

Talking about technology as a concept can be exciting. But when the concept transitions into the real world, it makes an even greater impact.

The clear trend we have observed is that a number of global and regional banks are increasingly adopting these solutions for similar reasons and getting comparable benefits.

Connect seamlessly and singularly with counterparties around the globe with Trade Notification from Thomson Reuters

International bank adoption

A leading international bank faced both technology and compliance challenges with processing its global FX trading activities.

Strict internal electronic communication surveillance policies and the conversational nature of FX dealing meant that any platform it used would be classified as a non-secure instant messaging system incapable of capturing and auditing all communication to and from external parties.

In addition, the bank relied on a relatively complex technology infrastructure, which included numerous deployed adaptors and third-party integration.

These adaptors required information to be routed to compliance and back-office systems, which increased the bank’s own infrastructure obligations and operational support.

The bank’s compliance team embraced a solution that combined a trade notification FIX interface for tickets and conversational chat to address the bank’s challenges and meet infrastructure obligations.

By adopting the FIX post-trade feeds over the trade notification service, the bank is now able to dramatically simplify the post-trade processing of its FX trading activities on over 50 FX dealing codes across more than 30 countries through a single pipe.

In addition to meeting its strict internal compliance requirements, the bank reduced its total cost of ownership (TCO) and took advantage of:

• Encryption and rich functionality for complex trade scenarios.
• Flexible data aggregation and segregation mapping to business models.

“The bank is also consuming the additional MIFID fields to enable it to meet its reporting obligations, a project that is more manageable when their STP is from one pipe.

The bank is also looking to leverage this infrastructure to access more liquidity sources that will be straight-through processed via the same connection. This is a prime example of an ongoing wider industry trend as banks seek to consolidate post trade processes.

Watch – MiFID II: What Does the New Pre- & Post-Trade Transparency Mean?

*see video here.

Regional FIX solutions

While the FIX trend was originally prevalent in international banks, increasingly regional solutions for around six to 10 codes are being adopted.

The combination of the TRTN FIX Interface and the Deal Tracker FIX Archiver is enabling them to store MIFID II-related information locally, and operate in a more transparent regulatory environment.

Most importantly, it ensures the technology is simplified while trade detail is never missed.

Learn how Thomson Reuters FXall can help you take advantage of the broadest array of trading capabilities and products

The effects of recent FX industry changes, such as the implementation of MiFID II, along with voluntary principles from the Global Code of Conduct, have combined to drive an industry wide, post-trade trend.

Banks, both international and more recently regional, are looking to navigate increased liquidity fragmentation, reduce their TCO and meet complex compliance requirements.

By taking advantage of a solution which was previously only used in the equities and FI space, the FX trading life cycle is being simplified to enable sell-side market participants to successfully tackle industry challenges

Now that Quarter 1 is ticked off the calendar, of course the countdown continues in earnest to January 2018 and the go-live date for MiFID II compliance.

Read more hereNow that Quarter 1 is ticked off the calendar, of course the countdown continues in earnest to January 2018 and the go-live date for MiFID II compliance.
The FIX MiFID working groups continue to meet regularly and most recently FIX Extension Pack 228 was published to extend the FIX Protocol to meet the requirements of MiFID II and MiFIR and covers a second set of critical data requirements identified by the sub-working groups on transparency, and order data and recordkeeping.
That brings FIX to four extension packs that are available for firms to download and implement as part of their work on MiFID II: EP206 (clock synchronization), EP216 (post-trade flagging obligations) and EP222 (critical data requirements identified by the sub-working groups on transparency, and order data and recordkeeping).
A few other things to highlight: work on the cybersecurity front continues with the further development of the FIX Cybersecurity Best Practices and the development of FIX over TLS Standard which involves extending FIX to meet cybersecurity requirements.
Additionally, there is a strong push underway for adoption of FIX for post-trade and there will be a new page on the site to showcase those firms that have implemented FIX in this space to date, so if you wish to be added to the list please contact the FIX Program Office.
Finally, please be on the lookout for the launch of the new FIX website, which will be revealed by the summer!

SBE has led to both a technical and an organizational revolution for FIX and is increasingly being adopted throughout the financial industry. For the full story, please click here.

Matthew Coupe is director of market structure for the European Markets at Barclays, based in London. He advises the markets division on future regulatory change, forms the advocacy position of the markets division on areas of regulatory change, and engages with politicians, trade associations, regulatory bodies and clients to make sure this is articulated effectively. For the full article, please click here.

FIX Trading Community is taking the initiative as markets prepare for the impact of MiFID II and meet new challenges. The second half of 2016 saw a significant uptick in meetings and calls relating to the impending Markets in Financial Instruments Directive (MiFID II) regulation. What became clear, is that the marketplace is keen for FIX to provide some practical answers to the implementation questions and members have stepped up to work collaboratively and set down on paper, guidelines, best practices and workflows. For the full article, please click here.

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If you missed the FIX EMEA event last week, there is something you need to know – while the final details of Markets in Financial Instruments Directive II (MiFID II) have not yet been ironed out and the directive’s final rules are not yet published in the Official Journal of the European Journal, there is no getting away from the fact that the rules will be legally binding on January 3, 2018, that regulators will not look lightly on breaches, and that asset managers claiming to be outside the scope of the rules need to make a reality check. For the full article, please click here

On the 2 March 2017 the FIX Trading Community is once again holding its annual one-day EMEA Trading Conference at Old Billingsgate in London. The event is now in its 9th year and is considered by many as the largest one-day trading event in Europe, full of lively debates, interesting keynote speeches and excellent networking opportunities. For the full article, please click here.

On 2nd March 2017, the FIX Trading Community will hold its 9th annual EMEA Trading Conference at Old Billingsgate in the City of London. Europe’s largest one-day trading event, the conference brings together market participants to discuss and debate hot topics and trends in the industry right now. It’s the place to be not only for discussions but also for valuable networking opportunities; last year’s conference was attended by over 900 delegates from 22 countries spanning Asia, Europe, Africa, and the Americas, featuring 16 sessions with 40 speakers, and this year’s event is set to be even bigger with over 130+ Buy-side attendees already registered! For the full article, please click here.