Architects of Electronic Trading: Technology Leaders Who Are Shaping Today's Financial Markets

CHAPTER 14

FIX

The Power of Standardization

As the Financial Information eXchange electronic communications protocol (FIX Protocol) gains further traction in a greater number of asset classes, it brings with it significant synergies for certain types of less-latency-sensitive market participants. In this chapter, W. Brennan Carley of Thomson Reuters explains how global standards continue to drive synergies. The widespread adoption of FIX enabled not only the rapid expansion of electronic markets but also played an important role in leveling the playing field among brokerage firms, exchanges, and electronic communication networks (ECNs), making it possible for firms to compete on price, execution quality, and other value-add services. Although the FIX protocol dates from the 1990s, its impact is not a thing of the past.

Going forward, FIX will continue to democratize new markets. In addition to its expansion into different asset classes like the OTC markets, FIX has the potential to streamline post-trade processes. As regulatory oversight imposes additional compliance demands, FIX will assume additional importance there as well. Finally, perhaps the crowning achievement of FIX is that it proves that the industry can work together cooperatively to deliver synergies and in doing so, provides a model for future joint development work.

The story of the widely accepted FIX protocol and how it came into being is unique. Standards are rare in financial services technology, especially ...