FPL releases support to advance fixed income trading following regulatory reform
FIX Protocol Limited (FPL), the non-profit, global, industry standards organisation that owns and develops the FIX Protocol messaging language, has issued best practices recommendations to support the trading of Credit Default Swaps (CDS) and Interest Rate Swaps (IRS).
As Dodd–Frank reforms seek to achieve greater market transparency by requiring most types of OTC derivatives to be cleared through clearing houses and traded on swaps execution facilities (SEFs), a surge in new market venues is expected within the US. Similar reforms are also expected to emerge from the upcoming MiFID II regulations in Europe. Encouraging adoption of FIX by new and existing venues will significantly increase efficiencies and cost savings for all participants within the fixed-income markets.
Working with a group of investment banks keen to encourage the adoption of standards by existing and emerging fixed income market venues, FPL has developed best practices for the trading of CDS and IRS products. Written by industry experts, these recommendations provide guidelines to trading venues on how FIX can be implemented in a standardised manner to deliver maximum industry-wide benefit. Additionally, the evolving business needs of these asset classes have been reviewed and enhancements added to FIX, to ensure it can comprehensively meet all business needs as effectively as possible. To access the guidelines and details of the enhancements please click here.
The FIX Protocol has become the way the world trades. It has achieved mass adoption for front-office equities trading, and its use is now steadily expanding across the foreign exchange, derivatives and fixed-income markets. The adoption of FIX by trading venues has risen significantly over recent years. FIX offers market participants significant cost savings and efficiency gains by connecting firms to trading partners in a standardised and cost‐effective manner, minimising the financial implications of market entry and significantly reducing switching costs.
Ric Elvir, Co-Chair of the FPL Global Fixed Income Committee, Credit Trading, UBS, says: “As regulators seek to achieve increased financial stability and enhanced transparency, we are witnessing significant changes in market structure. The opportunity to use FIX more extensively in the new world of fixed income trading will hopefully mean that the wide range of benefits long enjoyed in equities trading can be extended to this asset class.”
Sassan Danesh (pictured), Co-Chair FPL Global Fixed Income Committee, Managing Partner, Etrading Software, says: “I am delighted that this important milestone has been achieved and we are now in a position where the industry can truly benefit from the significant amount of work that has been conducted over recent months. The next step in this project will be to explore additional products, starting with the cash fixed income markets and how we can advance FIX adoption in these areas.”
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