The case for using FIX in the
post execution space and
how to implement
John Wilson
Director
Agenda
Confirmations - The current position
 Why change to FIX confirmations
 How to change
 When to change
 Further opportunities

Current position
Majority of firms have automated
confirmation processing
 Environment dominated by a few
providers via proprietary
infrastructure
 Costly to use with charge usually
levied on both buy and sell side
 Industry efforts to change have
floundered (GSTP, VMUs)

Current buy-side environment
NOE
OMS
Orders
ETL
NOE
Fix
Engine
Orders
Confirmation
Matching
Engine
ETL
Allocations
Confirmation
Affirmation
Confirms
service
Confirmation
Affirmation
Fix v4.4

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
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

Released in April 2003
Enhanced coverage of allocation and
confirmation processing
Network and vendor neutral protocol
Open standard offered on many networks
Processing allocations or confirmations on a FIX
connection incurs no additional costs
BUT its not a perfect substitute for existing
services…..
– Standing instructions
– Non repudiation

Awaiting regulatory approval re disclosures and
so forth
Why change to FIX
confirmations

MONEY (Spend of > $75,000 pa on
confirmations not uncommon)
–
–
–
–


Confirm charges
VAT/Sales tax
Connection charges
Maintenance/Subscriptions
Industry generates ≈ 250,000 electronic
confirms outside USA each day
(≈ 250,000 *$1 *2 *230 = $115m pa)
Current model is disconnected from the
trading space
Not forgetting……
Fix can encompass the automation of
allocation processing
 Communication of orders and
executions can be automated via FIX
 FIX works for multiple asset classes
 Cost is shared across the entire process

How to change

Solution proposed is
– Non intrusive with minimal change to
existing confirmation infrastructure
– Addition of FIX confirmation capability
and NOT immediate removal of existing
services
– Not dependent on front office
decisions on using FIX (but helps to
consult)
Recommended buy-side
environment
NOE
OMS
Orders
ETL
NOE
Fix
Engine
Allocations
Orders
Allocations
Confirmations
Confirmation
Matching
Engine
ETL
Affirmations
Confirmations
Confirmation
Affirmation
Confirms
service
Confirmation
Affirmation
How to change

Operating in the new environment
– Run a separate FIX session on the same
connection for allocations and confirms
– Get FIX engine to do the transformation,
subject to error handling facilities
– Matching engine to prefix confirm source
on messages to enable return routing
– Migrate with your largest brokers first
(savings come quicker and they will be
better equipped)
How to change

Our recommendations
– Tell your main brokers you will want to
receive FIX confirmation in near future
– Select a FIX engine with a pricing
structure reflecting your plans
– Discuss with your matching engine
vendor introducing additional
confirmation source
– Either bring forward your SWIFTNet
migration or look to alternate network
vendor
When to change
You need to indicate interest to your
brokers NOW
 The lead time for “first mover”
brokers is 4-5 months from interest
being registered
 Most major brokers could be ready
in 5-6 months from now
 Your project will take about 3
months in duration for < £20k

Settlement instructions
FIX does not address the SSI facilities
most firms rely upon
 Current SSI facilities remain costly
with high errors rates reported
 We think alternatives could rapidly
appear if you concur with the
concept(s)

“STP Lite”

Model 1
– Custodians broadcast SSI updates directly to
the buy-side firms to append to (FIX)
confirmation acceptances

Model 2
– SWIFTNet hub enriches messages in real-time
from custodian SSI databases (that were
originally constructed for GSTP)

Model 3
– Buy side firms notify sell side of which agent to
deal with and then passes “conversation”
over (Not a FIX capability yet!)
Useful material

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“Confirmations cost calculator”
“How to FIX it Guide”
“Pitfalls of implementing FIX”
“FIX – The business imperative”
FIX Protocol version 4.4
This presentation!
www.CityiQ.com
Summary
FIX confirms will be able to substantially
eliminate your confirmation costs
 Solution can be implemented quickly
and on a bi-lateral basis
 Re-use of existing facilities positively
encouraged
 Some benefits will extend upstream if
not already FIX enabled
 Settlement instructions is the next
challenge. Sign up today to make the
world a better place!

CityIQ can help you with

Developing your business case

Aiding your prioritisation of requirements

Providing guidance on technology
solutions to suit your needs

Planning and implementing your solution

Automating and refining your processes

Developing your control environment
CityIQ Limited
68 Lombard Street
London
EC3V 9LJ
United Kingdom
T: +44 (0) 207 477 6580
F: +44 (0) 207 477 6768
www.CityIQ.com
E: [email protected]