The Fixed Income Connectivity Working Group (FICWG) of leading sell side banks has today committed to further increase transparency and efficiency in the cash bond markets by the promotion of open, standardized protocols for the electronic trading of cash fixed income products.
The FICWG initiative was launched by the global investment banking community in June 2011 and supported by Etrading Software Limited ("Etrading Software") and Expand Research LLP ("Expand"). In 2011, the focus of the initiative was to define the next generation industry standard for trading Interest Rate Swaps (IRS) and Credit Default Swaps (CDS), working with FIX Protocol Ltd (FPL) and the leading fixed income venues expected to become Swap Execution Facilities (SEFs). Successful execution of the initiative in 2011 resulted in the creation of a set of global best practices recommendations for using the FIX Protocol for the electronic trading of IRS and CDS. These recommendations, which are in the final stages of approval by FPL, are expected to form the basis of many of the trading protocols being implemented by SEFs in 2012.
In 2012, the FICWG initiative will extend the benefits of the open standards to the trading of cash bonds. The scope of the initiative includes standardisation of protocols for pricing and trading government bonds (e.g. US Treasuries, Euro-zone government bonds, Gilts, JGBs) as well as the major credit instruments (e.g. Sovereigns, Supras, Corporates, High Yield and Emerging Markets).
The initiative will generate the following benefits for market participants:
1. Increased transparency through faster and easier integration between market participants
2. Increased efficiency through lower cost of ownership of the technology required for trading and connectivity
Additional benefits for market participants include faster time to market for new features and products; greater vendor choice and technical flexibility; ability to deploy and re-use trading platform infrastructure across multiple asset classes and improved supportability of trading platforms.
"At Commerzbank we are delighted to support this group to establish increased transparency and efficiency in fixed income trading. Following the successful agreement of the latest protocol for IRS and CDS products, we believe the next logical step is the addition for cash bonds and we look forward to further developments in 2012." / Inga Johal - Acting Head of Bond Trading & Financing (Head of EM & CD) at Commerzbank.
"This initiative will increase transparency and efficiency in fixed income OTC markets by promoting greater technical standardisation and openness across the industry. Among market participants, the initiative will provide a more cost efficient and faster integration process, which is a key requirement in today's rapidly changing environment." / Neil Chinai - Head of Global Rates & Emerging Markets Technology at Barclays Capital.
"Set against the backdrop of sweeping regulatory changes in the fixed income OTC markets, the FICWG efforts to promote a standardized protocol for trading fixed income bond products is more relevant than ever before. We support the goal of enhanced transparency and improved efficiency in trade execution that this initiative aims to achieve." / Sander Schol, Director, The Association for Financial Markets in Europe (AFME).
Over the course of this year, FICWG will liaise with FPL and industry stakeholders to create a set of global best practices recommendations for using the FIX Protocol for the trading of cash bonds, with the aim of achieving ratification during 2012.