Taiwan's data transmission integration project will help to enhance efficiency, reduce costs and provide a standard platform for local brokers to connect with international buy-side institutions, according to Ed Mangles, regional director, Asia Pacific, Financial Information eXchange (FIX) Protocol Ltd.
The ongoing project, which started in December 2009, includes a “network integration service” that will allow small- and mid-sized brokerages to use only one communication line to connect with the different securities and futures markets via fixed line operators. It also involves an integration of the FIX Protocol service to allow trading firms to use one single application to conduct transactions in the different securities and futures markets.
“Much of the adoption of FIX in Taiwan is being driven by sell-side firms that want to encourage buy-side institutions to access the Taiwan markets. If they are on FIX, and given the integration work going through to the exchange, it makes the whole system more efficient. Everybody is speaking the same language,” Mangles said.
The project, which is supported by Taiwan's financial regulator, the Financial Supervisory Commission, includes among its leading participants the Taiwan Stock Exchange (TWSE), Taiwan Futures Exchange (Taifex), GreTai Securities Market and the Taiwan Depository and Clearing Corporation. Local brokers that have so far expressed interest in using the integrated services include Capital Securities, Hua Nan Securities, Fubon Securities, Jih Sun Securities, Yuanta Securities and Systex.
According to the TWSE, the completion of the project will help reduce the annual transaction costs for the entire market by an estimated NT$130 million-NT$200 million (US$4.5 million-US$6.9 million), including cost savings of NT$55 million-NT120 million from the network integration service and savings of NT$75 million-NT$80 million from the use of FIX Protocol.
“The adoption of the FIX protocol as part of the integration of our securities and derivatives system means that participants can now trade different products with a single message protocol. This has resulted in greater efficiency and convenience for investors. We are already attracting strong interest from the investment community with more than five of Taiwan 's top ten most active brokers signed up,” said Michael Lin, senior executive vice president, TWSE.
FPL, as a volunteer member organisation, is not involved in the hands-on work of the integration project. The FIX protocol is an electronic communications protocol developed for real-time exchange of securities transactions in the financial markets globally. As the securities market's leading communications protocol, FIX is integral to many order management and trading systems. FPL's role is to promote use of the protocol across the industry and to ensure it is used in a way that supports its universality.
“We're keen for people to implement FIX in a standard way,” explained Mangles. “The idea is that they take the standard and look at what functionality can be supported. If additional functionality needs supporting, we would work with them to include it in an extension or service pack within the FIX standard. If proprietary tags and proprietary elements are introduced, it it can add extra cost to the entire industry. So we try to encourage exchanges to work within the standard. Through our membership in Taiwan, we are looking at how best to interact with the multiple exchanges and assist in making any implementation as standard as possible,” he added.
The TWSE's FIX Protocol platform, which officially went live on 27 September 2010, was introduced alongside the existing Transaction Message Protocol to lower the costs for local Taiwanese brokers when connecting to overseas markets.
“This is only part of TWSE's ongoing efforts to raise the competitiveness of the Taiwan capital market,” said Lin. “We will continue to work closely with the FSC and Taiwan 's other trading platforms to further improve our trading infrastructure.”
To date, Taifex and TWSE have adopted the earlier versions of the protocol, FIX 4.2 and FIX 4.4. The FIX 5.0 Service Pack 2 released in April 2009 included major enhancements such as a new set of reference data messages to support the communication of party relationships and risk limits and new functionality to support market data stream assignments by price makers when prices are distributed via third-party distribution channels.
“A lot of the functionality supported by the latest versions of the protocol, from FIX version 5 onwards, has been specifically designed for the exchange environment,” Mangles added.
Author: Jill Wong