Algorithmic Trading

FIX predicts rapid uptake of new algo language

FIX Protocol Limited (FPL), the developer of the FIX financial messaging standard, has released the first official version of its algorithmic trading definition language (FIXatdl), which it claims will significantly decrease the time and cost of implementing new execution strategies.

Using FIXatdl version 1.1, sell-side firms and providers of algorithms will be able send the specifications of their algorithms to vendors and buy-side firms using an industry-standard, computer-readable XML file rather than paper documents.

While FIXatdl has existed since March 2008 – when it became a fully-approved FIX standard – and is already in use at a handful of broker-dealers and vendors, previous versions were essentially betas and this is the first version FPL has recommended for adoption by the industry.

“Market participants have now indicated to us that they are ready to adopt and embrace widespread use of FIXatdl,” said Stuart Adams, regional director, EMEA, FIX Protocol. “As the market structure continues to evolve, buy-side traders want to make more adjustments and exercise a greater level of control over their algorithms and FIXatdl allows them to do this at a lower cost and with a reduction in development time.”

Rick Labs, co-chair of the FIX algorithmic trading working group, who was heavily involved in the development of FIXatdl version 1.1, estimates that the majority of broker-dealers providing algorithms will be using the service within 12 months.

To upload algorithms currently, sell-side firms are required to send detailed paper documents to vendors as well as engaging in comprehensive coding and testing processes. This means that traders typically wait months for algos to reach their desktops.

Using a standard methodology for loading algorithms on to order and execution management systems, sell-side firms will now be able to decrease the time-to-market for new and updated trading strategies from months to a matter of days. Order and execution management vendors will only need to program their systems once to handle FIXatdl files and traders will be able to deploy the resulting strategies using FIX messages.

Andrew Bowley, executive director, head of electronic trading product management, Nomura, added that the decrease in the time required to distribute algos using FIXatdl will give rise to client-specific strategies that can be accessed more easily via buy-side desktop applications.

“Having the ability to send a single ready-to-use file to vendors means we are easily able to create and deploy tailor-made strategies for clients that want to adjust parameters such as aggressiveness and participation thresholds, or combine aspects of our existing strategies,” he said.

Bowley also noted that FIXatdl could encourage more customisation and sophistication of algorithmic offerings abroad, especially in Asia where use of algorithms is steadily increasing.

“We have started using FIXatdl in Tokyo to create Japanese versions of algorithms,” he said. “While it may be easy for a Japanese trader to specify price, direction and stock symbol aspects of an algo, there may be some anxiety around translating other parameters such as level of aggressiveness, which are better described in the trader’s native language.”

Rustam Lam, director at execution management system (EMS) provider RealTick, predicted that the launch of FIXatdl would create a new front for competition between vendors.

“The launch of FIXatdl to the mainstream represents a step change to the way brokers’ algorithmic execution services are adopted,” he said. “RealTick worked closely with FPL and the industry early on and created a suite of web based tools for broker partners to fully promote accelerated algo deployment to trading clients. FIXatdl can provide a real competitive differentiator in the market. Over time, those that do not use it will find they quickly fall behind the curve.”

The electronic trading community has already begun support FIXatdl. Data vendor and trading technology provider Thomson Reuters has said it would use the language in version 9.1 of Client Simulator, a tool for testing inbound FIX order flow.

Client Simulator, a product Thomson Reuters acquired as part of its purchase of trading technology company Aegisoft in February 2010, is used by broker-dealers to test their strategy schema files and ensure correct validation and processing of algorithmic order flow before deploying them in a live environment.

“Robust FIXatdl testing tools like Client Simulator give broker dealers the confidence that their latest algo strategies can be deployed quickly, and the resulting inbound FIXatdl generated order flow will not pose any systemic risk on downstream execution infrastructure,” said FIX Protocol’s Labs in a statement.

In addition, global multi-asset EMS provider Portware has partnered with investment bank Thomas Weisel Partners to integrate the bank’s of algorithmic strategies into the Portware Enterprise EMS using FIXatdl.

“As an early supporter of the FIXatdl protocol, Portware can rapidly integrate these algorithms into their Enterprise trading platform, reducing implementation times and helping traders quickly take advantage of our most advanced algorithmic offerings,” commented Steve Blatney, managing director and head of electronic trading at Thomas Weisel Partners.