FIX Trading Community publishes guidelines to facilitate efficient communication of client information to emerging SEFs

FIX Protocol Updates 25 Sep 2013

FIX Trading Community, the non-profit, industry-driven standards body at the heart of global financial trading, today published recommended guidelines for the efficient electronic communication of client entitlement information between broker-dealers and the emerging Swap Execution Facilities (SEFs) set to launch shortly.

The guidelines explain how the currently manual business process that will be required to transfer details about client relationships and their associated permissions can be carried out in an electronic, automated and standardised manner, presenting the potential to reduce operational risk and generate considerable efficiency gains and cost savings.

As regulatory efforts such as the US Dodd-Frank Act and the EU's MiFID II seek to increase market stability, the structure of the OTC derivatives and OTC fixed income markets is undergoing significant change, with a more electronic and fragmented environment emerging. Quarter 4 2013 will witness the launch of the first SEFs in the US market, and in Europe, as the rules relating to MiFID II are further clarified, OTC trading will continue to migrate to Multilateral Trading Platforms (MTFs), while Organised Trading Facilities (OTFs) are expected to surface.

The trading platforms used by broker-dealers to trade on these emerging venues will need to understand important client information such as:

  • which clients are able to trade with which counterparties
  • the types of trades they can conduct
  • how their trades should be cleared.

The new guidelines published by FIX Trading Community explain how this information, along with other details pertinent to the client relationship, can be communicated between the broker-dealers and the SEFs in an automated manner using the FIX messaging language. The guidelines set out how a standardised approach to communication can bring increased efficiency, speed and reliability to the process.

FIX has become the way the world trades. It is used by thousands of firms every day to complete millions of transactions, enabling the industry to minimise the cost of trading, maximise operational efficiencies and achieve increased transparency. These guidelines build upon previously-released best-practice recommendations developed to enable market participants to use FIX to trade swaps and cash bonds on existing and emerging trading venues. These guidelines are now being rapidly adopted by market participants, with almost all new SEFs planning to offer access using FIX.

To view the guidelines for the communication of client entitlement information between broker-dealers and SEFs, please click here. The Global Fixed Income Subcommittee's next steps will see the development of recommended practices for automating the communication of client entitlement information to support the trading of cash bonds.

Commenting on this announcement Sassan Danesh, Co-Chair FIX Trading Community Global Fixed Income Subcommittee and Managing Partner, Etrading Software said, 'Communicating client enablement information is currently a very labour-intensive process, and as each trading relationship will need to be validated on Day 1 of the new SEFs going live, the impact of standardised electronic procedures could be huge - significantly speeding up the enablement process and considerably reducing the potential for errors.'

Commenting on the guidelines Andrew Miller, Executive Director, e-Trading Client Services, J.P. Morgan stated, "Traditionally, enablement of clients to trade electronically entails significant manual effort, with the ensuing consequences for the cost, speed and accuracy of client set ups. These guidelines will provide client entitlement in a consistent manner across SEFs and will support stronger client service, control and agility. Without such an approach, we would need to provide these details in a multitude of different ways."

Commenting on the guidelines Matthew Arnold, Managing Director in Goldman Sachs' Securities Division stated, "The release of these guidelines offers significant potential for derivative market participants. Providing client entitlement information in a consistent manner across all of the SEFs we plan to trade on offers efficiency savings and better control. This initiative will help remove unnecessary complexity from the client enablement process."

Additionally "The new FIX guidelines will help the industry standardise client enablement on electronic derivatives platforms," said Justin Peterson, Managing Director at Tradeweb. "Tradeweb worked closely with FIX Trading Community to develop this initiative, and we believe market participants will benefit from the increased speed and capacity it will bring for enabling with SEFs in the U.S., but also electronic platforms in Europe and Asia."


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