Because FIX Trading Community is an integral part of transparent global markets

By Maria Netley, EMEA Regional Director, FIX Trading Community

Maria Netley, FIX

Without the FIX Trading Community, the ability of the global regulatory community to provide transparent markets would be next to impossible. That sounds like a pretty broad statement to the community, so let’s take a look at what exactly we mean by that.

Almost without exception, regulators are striving for better transparency in “markets”, but what exactly does that mean? Transparency is how all users of the markets, be they private individuals, professional investors or large corporations, are able to clearly see exactly what is happening in our markets. The markets, however, are not straightforward, and a trade between two participants is nothing like the transaction between two others. The most important part of transparency is understanding the true circumstances of each individual transaction – without this information the data is meaningless.

Furthermore, each region, country and jurisdiction has different rules. The rules are often of a high standard and therefore are implemented in slightly different ways – the result is that users start not trusting the data and find it difficult to understand or disprove what they see in the markets. Only when the data is clear and unambiguous can regulators fulfill their obligation to monitor and supervise safe markets.

So, what exactly is needed to ensure that markets are transparent and clear, both for market users and those tasked with making them safe?

Global financial markets need clear standards and clear guidelines. They need frequent clarifications (not to remedy legislative shortcomings); quality data; constant challenge; and flexibility for improvement change. Finally, markets need the ability to properly censor those who do not follow the letter, or the spirit, of the rules.

So where does FIX fit in? Market participants must be able to create value and generate revenue through the work they do, but human nature will tend to cause companies to distort their views to suit their own personal needs and motivations. This means that regulators walk a tightrope daily trying to understand the minutiae of the subtleties of the market without necessarily getting the full picture. All market participants are represented by an army of industry organizations (as they should) to defend on their behalf and protect their business models, and these groups will have as many differences of opinion as there are business models to protect.

The FIX Trading Community is a unique organization that represents the provision of data for all market groups and is able to step away from any discussion that deviates from the ultimate goal of clear standards.

The organization is uniquely positioned to bring together market participants to deliver these standards and guidelines in a professional environment where members are constantly reminded to “leave their corporate hats at the door”. It may seem that in a corporate world where dogs eat dogs it is difficult to understand how companies do this, but ultimately there is a clear business reason why companies work together. Regulation is as inevitable as death and taxes, and keeping the cost of compliance as low as possible only comes with the use of good, well-defined standards.

The FIX Trading Community has existed for nearly 30 years (the first FIX committee was formed in 1994) and the organization continues to work constantly to improve efficiency, lower operating costs and reduce the operational risk of markets.

In more recent years, the community’s goal has been to maintain the pace of change and to ensure that the FIX Protocol remains relevant extensions, guidelines and recommended practices.

The FIX Trading Community working with its members can provide these standards and guidelines. I am in a central position to make sense of any proposal, to convey to markets a detailed understanding of trade flows and where the “tricks” can be found, and to guide regulators towards regulatory standards that make sense and avoid unwanted consequences. At the heart of good standards is also an understanding of what constitutes valid data and what is incorrect data and how harmful data can be eliminated and eliminated.

The FIX Trading Community does its job well, but it can only do it well with the support of our members. This includes financial support to enable the mechanics of the process, as well as support from companies to allow their teams the space to get involved and to provide crucial input across the spectrum of the industry (buy-side, sell-side, suppliers, locations : everyone has a part to play).

However, we cannot do everything. The FIX Trading Community cannot oversee the markets, which must remain the responsibility of our regulators, but we can continue to provide advice on data issues that may arise and what can be done to resolve them for transparency reasons.

Be part of the solution and get involved.


Transparency of execution:

As regulations and buy / sell sophistication evolve, the desire for more detailed transactional data increases. It is important that the FIX protocol continues to evolve to ensure that new data becomes available in a common and unambiguous way. The extension and introduction of new fields and values ​​in this area has supported this evolution. However, even after the protocol has been extended, periodic reviews of implementation across the sector allow working groups to provide further guidance where needed.

Transaction Cost Analysis (TCA):

This work has enabled the creation of industry-wide terminology, guidelines and best practices that allow for a more consistent assessment of the investment process and trading costs.

Post-trade transparency and European Consolidated Tape:

We have continued to develop the Market Model Typology (MMT) standard for trade categorization, which is now adopted by all major European equity and APA trading venues. In addition, the FIX protocol is used for the majority of APA business relationships across Europe. We are extending both the MMT and the FIX protocol to support ESMA and FCA changes to post-trade transparency rules in Europe and the UK. We are also writing definitions of addressable liquidity and refining our guidelines on liquidity categorization.

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