The trading industry has begun implementing a FIX protocol designed to automate and standardise key buy-side client information for OTC trades.
FIX Trading Community, the standards body responsible for maintaining and developing the FIX protocol, said the Trading Enablement Standardisation Initiative (TESI) will reduce operation risk and make it easier to set up new clients on OTC electronic trading platforms.
TESI was launched in January 2013 with the goal of standardising important client information to facilitate automation. Easily setting up access for new buy-side traders, giving them a risk profile and enabling them to trade new products were key objectives.
Sassan Danesh, co-chair of the FIX Trading Community Global Fixed Income Committee, said: “Historically, the management of trading relationships across OTC markets has been an error-prone manual process.”
He added that FIX provides a straight through process to enable firms that use it to provide a better client service and reduce risk by ensuring counterparty information is disseminated in a consistent way between market participants.
As part of TESI, FIX worked closely with a number of electronic trading platforms operating OTC markets.
Among those was Tradeweb, which runs fixed income, equities and derivatives trading platforms, including a swap execution facility.
Justin Peterson, managing director at Tradeweb, said: “We worked closely with FIX Trading Community to develop the initiative and are implementing it because of the benefits it brings to our clients in the global fixed income trading industry and in the derivatives markets in Europe and Asia.”
Regulatory change has been driving OTC trading activity onto electronic platforms, with the fixed income and derivatives market following the lead of equity markets, which have largely become fully automated. Particularly in fixed income, regulations such as Basel III have made it difficult for banks to hold inventory and make prices, resulting in greater reliance on all-to-all trading platforms, where buy-siders are seen a key liquidity providers.