Trading Venues

FIX prepares market for automated bond trading

FIX Protocol Limited, a provider of messaging standards, has published guidelines for the electronic trading of fixed income ahead of new regulations that will lead to greater automation of bond trading.

The guidance has been formed to help market participants establish cost effective connectivity to the growing number of bond trading platforms that are being launched across Europe and the US. They include recommendations on using FIX standards to support bond trading on request-for-quote, central limit order book or quote-driven markets developed by existing and emerging venues, broker-dealers and market makers.

The launch of new bond trading venues is a response to regulations like Basel III and MiFID II, which will make it more costly for banks to offer bond liquidity. The rules will shift an asset class that has traditionally been voice-traded into a venue-driven trading environment.

"This initiative is expected to play a significant role in the evolution of bond trading," commented Sassan Danesh, co-chair of the FIX global fixed income committee and managing partner of ETrading Software. "In recent years this market has witnessed massive change and as it becomes increasingly electronic encouraging the use of FIX will be vital to its success."

The latest FIX guidelines follow a similar best practice document that included recommendations for swap execution facilities (SEFs) offering trading in credit derivatives and interest rate swaps.

SEFs are a category of market emanating from the US' widespread reform of OTC derivatives markets under the Dodd-Frank Act. The rules will require trading of swaps on exchange-like platforms in addition to central clearing obligations, where possible. The Commodity and Futures Trading Commission is expected to unveil the final rules governing SEFs in the coming weeks. 

Anish Puaar +44 (0)20 7397 3817 anish.puaar@thetrade.ltd.uk