New FIX messaging standards supporting venue audit trails are set to be launched before the end of the year.
While the move to include an audit trail of venues, enabling institutional investors to see which venues their orders were exposed to, was already popular, increased focus on the impact toxic flow can have on buy-side orders since the publication of Michael Lewis’ ‘Flash Boys’ earlier this year has heightened the need to get the standards in place.
“After the release of Flash Boys we started to see the momentum around venue tracking really build up. Everyone was aware that this information needed to be in FIX but it had been seen as a highly technical issue before that,” said Michele Patron, co-chair of FIX Trading Community’s buy-side working group for EMEA and senior quantitative trader at Alliance Bernstein.
Patron particularly welcomed the role of the sell-side in the further development of venue information contained within Tag 30, which currently only shows the venue an order was actually executed on.
He added, “In the past, the sell-side would want to know why the buy-side needed this information, but now our clients are also asking about it and the sell-side is getting on board with the need for greater transparency.”
‘Flash Boys’ caused a storm back in March this year when it suggested that US equities markets were rigged against investors due to the role of high-frequency traders (HFT) in dark pools, raising concerns among end investors that their orders were being gamed. Additionally, accusations that Barclays deliberately misled investors in the US over the extent of HFT in its Barclays LX dark pool have served to heighten interest among the buy-side in being able to accurately track which pools their orders are exposed to.
A draft standards document was produced at the end of August and FIX hopes to be able to publish it shortly after the final details are agreed.
“The next buy-side working group meeting is taking place in November and before the end of the year we hope to have the new standards published alongside standards for interacting with the Market Model Typology,” said Patron.
Other FIX initiatives currently in the works include an increased level of detail in Tag 29, to show whether a broker acted as an agent or principal on a trade. It is also circulating a draft proposal for a new Tag 2405, which will capture whether a trade was executed on a high or low touch basis.