Fix Protocol Limited updates post-trade guidelines

As the tolerance level for post-trade inefficiencies is minimised, the industry is witnessing a determined drive to adopt free, open and non-proprietary standards as the platform on which firms can manage their operational risk and cost base. The strain on the industry's post-trade infrastructure is expected to permeate further with increasing regulation, shorter settlement cycles and the recognition that there is no competitive edge in this space. Investment managers and broker dealers are focused on using mutually agreed standards to deliver higher efficiencies and lower costs. The FPL Post-Trade Processing Guidelines were originally disseminated in April 2012 by the FPL Americas Buy-side Working Group to help address these challenges, and enable firms to leverage and extend their existing FIX investments into the post-trade environment, and also benefit from the many advantages delivered by increased straight-through processing (STP).

The guidelines are now being successfully implemented globally by many investment managers, broker dealers and vendors. These firms have provided significant feedback throughout the implementation process, which has been incorporated into the guidelines as they have been revised and extended. This includes specific enhancements that offer recommended best practices regarding the use of FIX to support allocations, confirmations and affirmations.
The guidelines have been produced by market participants keen to encourage the increased use of FIX for post-trade processing and offer firms the opportunity to benefit from:
• reduced dependency and risks associated with having a single approach for processing trades in the post-trade environment
• a standardised approach to workflows, reducing complexity and in turn the costs and the time required for issue resolution
• the ability to eliminate matching ambiguity and the need for complex matching algorithms through the use of standardised trade identifiers
• increased guiders
• increased guidance about fee types, helping to reduce trade-breaks which in turn reduces costs and processing time
• detailed settlement instructions for confirmation processing, reducing management costs and potential errors

The guidelines have been specifically designed to facilitate phased implementation by both the buy-side and sell-side communities. Ensuring the guidelines continue to support global post-trade processing is a key area of focus and the organisation welcomes feedback, and is currently exploring even further ways in which they could be enhanced to additionally support the needs of different markets across the world.

Commenting on the guidelines, David Tolman, Chair FPL Americas Buy-side Post-Trade Working Group, Professional Services, Greenline Financial Technologies, Inc said, "We have witnessed major progress in this initiative in the last 12 months, thanks to substantial industry-wide participation. Through market feedback we have been able to provide more detailed guidance about how confirmations and allocations can be delivered using FIX, including further information about how settlement instructions and market fees can be represented. Through industry collaboration we are now moving forward at a very rapid pace."

Commenting on the enhanced guidelines, Scott Atwell, FPL Director and Manager of FIX Trading and Connectivity at American Century Investments added,
"Extending the use of FIX to post-trade completes the communication cycle between buy-side and sell-side firms. After using FIX for the order and execution processing, a buy-side firm can simply send a FIX Allocation with account-level breakdowns, and the sell-side firm will send a FIX Confirmation message for each account. After successfully matching, the buy-side firm then responds with a FIX message to affirm each confirm creating a succinct process with an audit trail. The benefits include efficiency gains, improved straight-through processing, and quicker identification of issues, all of which provide significant risk reduction and cost savings."

Michael Fiscella, Executive Director at Morgan Stanley added:
"Post trade STP standardisation using the FIX Protocol is increasingly important for our clients as they seek to enhance operational efficiencies, streamline processes, and improve resiliency."