FIX and vendors: the next step, offering standardized services

SunGard’s approach is to offer our clients and their FIX counterparts Rules Of Engagement that are in line with FIX best practices, whether it is about collecting a plain-vanilla equity order, a derivative order, a client allocation, or broadcasting market data.

Historically, SunGard’s global trading business (formerly GL Trade) was not the earliest adopter of FIX protocol, mainly because of a strong, comprehensive proprietary protocol which, combined with the GL Net order routing network, allowed for highly efficient implementations within and between client firms’ systems.

This did not come without drawbacks, however, as other Independent Software Vendors (ISVs) were able to leverage the FIX Protocol to build efficient and convenient solutions for integration of FIX workflow into SunGard systems.

SunGard has since fully adopted FIX, with a large majority of our clients exchanging FIX data flows in and out of our products. However, this adoption was not completely optimized: too many individual exchange specifics remained in our FIX Rules Of Engagement, which were sometimes difficult to comply with for our clients.

SunGard’s approach is now to offer our clients and their FIX counterparts Rules Of Engagement that are in line with FIX best practices, whether it is about collecting a plain-vanilla equity order, a derivative order, a client allocation, or broadcasting market data.

Without questioning the success and benefits of FIX Protocol, as discussed in our responses to the round-table questions, it is relevant to mention some issues that have arisen as a result of the FIX boom, and can lead to interesting opportunities for ISVs:

• It is clear that implementations of the FIX Protocol can vary widely from one party to another, whether buy- or sell-side, network, ISV or exchange. One might think that two FIX-enabled parties can always interconnect easily, but this is not the case. Many early adopters had to work around the FIX standards, adding many user-defined fields and messages, in order to implement functionalities before relevant committees had time to write specifications. That is the price that the FIX community has paid for its success and rapid expansion.
• There is therefore a good opportunity for ISVs to offer FIX protocol “standardization” services, whether between buy- and sell-sides, as many vendors or networks already do, or even between the sell-side and exchanges, as the latter are far from offering consistent implementations of the FIX protocol.
•  The constant quest for ultra-low-latency systems, in order to reach the execution venue first and leverage on the slightest price arbitrage opportunity, mostly driven by the so-called “silicon traders”, raises many technology challenges. Given the prevalence of FIX standards across the new markets where these activities tend to be concentrated, there is opportunity for required algorithmic trading tools and risk management systems to be applied rapidly and cost-effectively.
• The prevalence of the FIX standard means that software systems’ interfaces to it have effectively become a commodity: they do not bring any differentiated value to the financial institutions that use them. As such, FIX engineering arguably has little place today as a ‘core competence’ of these user firms, and the management of FIX connections is ripe for outsourcing to specialist firms who can apply economies of scale. Telecommunications costs can also be significantly reduced by the same means – potentially tens of communication links and hundreds of client connections can be consolidated into one FIX session received via a single interface. SunGard is an active service provider in this field.
• On a strategic level, some areas of the FIX Protocol (e.g. FIXML, post-trade flow) have not been as successful as expected: Financial institutions and ISVs still need to be careful not to rush into the application of new standards without due diligence.

Today, the question is not whether an ISV should adopt FIX, but rather how it can leverage this standard protocol to strengthen its offer and positioning.

SunGard is committed to our range of FIX products and services, and we ensure that FIX Protocol usage is considered throughout the entire SunGard offer, from trading to market data, and from front- to back-office.

Also, by providing a unique/universal language, FIX Protocol has become as a key component of SunGard’s ASP and Software as a Service (SaaS) business models, which are now the central direction in which we are driving our business. The FIX standard clearly has a key role to play in assisting the creation and take-up of cloud-computing services for the financial markets.