By Bill Hebert and Ignatius John of Alpha-Omega Financial Systems.
Multiple Asset Classes
As with many other initiatives involving FIX and electronic trading, equities has paved the way for the development of innovative post﹣trade solutions. With the adoption of FIX based post-trade that is now gaining significant momentum in the industry, the questions looking forward are: “Which markets and security types will follow suit, and how much of what has been developed for equities is suitable for other asset classes?”
The newly organised Global Post-Trade Working Group and other involved committees within the FIX Community are now addressing these issues. For starters, fixed income is receiving a lot of attention. With its legacy of manually intensive processing and limited options for front to back automation, fixed income post-trade is ripe for new solutions. Several buy- and sell-side firms have also expressed interest, or are currently engaged in pilot programs for enhancing FIX post-trade for foreign exchange, derivatives and even commodity-based instruments.
Expansion of FIX Post-Trade Workflows
Trade allocations have been provided for in FIX since the launch of v2.7 in the 1990s. The enhanced workflow in v4.4, with the addition of comprehensive affirmation and confirmation detail, has driven much of the more recent focus and led to the development of complete FIX post-trade solutions for the industry.
So where do we go from here? Cross border trading may add some complexities to post-trade. These will need to be addressed and any necessary changes incorporated, especially with regard to local regulatory mandates and operational practices. Fortunately, FIX has anticipated much of what will be needed and is also capable of working and coexisting with other established standards to gain greater traction in the post-trade space.
Communication with custodians and the management of settlement instructions are also an integral part of post-trade. With recent enhancements, FIX is now capable of accommodating settlement instructions that can be sent to the custodian banks, thereby providing a comprehensive FIX-based solution for the post-trade process.
Achieving Straight Through Processing
With the advanced adoption of FIX beyond the more traditional equities and front office usage, the post-trade process will soon become more tightly integrated with that of trade execution. Order and execution management systems will further collaborate with post-trade solution providers in order to deliver seamless, accurate and timely messaging from pre trade indications, to order routing and execution, to post-trade. This will increasingly eliminate the processing barriers between front, middle and back office and result in a fully automated lifecycle from pre-trade to trade settlement.