Fixed Income venues have now moved to adopt common technical standards for the electronic trading of Swaps.
Since 2011, the Fixed Income Connectivity Working Group (FICWG), an initiative comprising the global investment banks committed to increasing transparency and efficiency in the fixed income markets, has been working with the leading venues expected to register as Swap Execution Facilities (SEFs) under the US-based Dodd-Frank legislation and Organised Trading Facilities (OTFs) under the European MIFID II directive, to create a set of global best practices for the trading of IRS and CDS using open technical standards such the FIX Protocol and FpML.
Work on defining the first version of the best practices commenced in June 2011 and was formally ratified by the FIX Protocol standards body in March 2012. Since then, the overwhelming majority of swaps venues have moved to adopt the open FIX Protocol and the associated best practices for the electronic trading of IRS and CDS products.
The list of adopters include BGC Partners, Creditex, Dealerweb, Eris Exchange, GFI Group, ICAP, iSwap, MarketAxess, SwapEx, Tradition Trad-X and Tradeweb.
The benefits of industry-wide adoption of common technical standards include:
- Increased transparency through faster and easier integration between market participants
- Increased efficiency through lower cost of ownership of the technology required for trading and connectivity
"We are supportive of the effort by the FICWG and are pleased with the progress and wide support from the industry. GFI will continue to work to spread the use of FIX according to the best practices being introduced". Francesco Cicero, Head of eTrading at GFI Group.
"We're very happy to be working with the fixed income community to create this market standard. Our commitment to customers is paramount at ICAP, and this project helps to secure a cost effective, flexible and adaptive solution for them and the marketplace." Chris Ferreri, Managing Director, ICAP.
"The adoption of a market standard for messaging is integral to the growth of an effective swaps market. MarketAxess fully supports the FICWG's initiative and we look forward to working with the industry to help promote greater transparency in these markets." Joe Feerick, Head of Product Management, MarketAxess Europe.
"ISDA supports the efforts of the FICWG to create a set of best practices for the trading of Interest Rate Swaps and Credit Default Swaps, leveraging FpML. The industry has been, and is committed to increasing transparency and efficiency in the swaps market and technical standards such as FpML have an important role to play in achieving these objective ." Karel Engelen, Director and Head of Technology Solutions, International Swaps and Derivatives Association (ISDA).
"This represents an important step forward towards the development of standardised communication between SEF's and their users. FPL has worked hard to encourage the consistent implementation of FIX in this market through the production and promotion of clear implementation guidelines. The industry benefits considerably from standardised connectivity, significantly lower costs at a time when there are many financial pressures." Kevin Houstoun, Co-Chair FPL Global Technical Committee, Chairman and Founder, Rapid Addition.
FICWG members include BofA Merrill Lynch, Barclays, BNP Paribas, Commerzbank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Nomura, RBS, UBS as well as others and are supported by Etrading Software Limited and Expand Research, a company of the Boston Consulting Group.