A Fixed-Income Protocol
Takes Center Stage
By Ivy Schmerken
June 18, 2001
What About Interoperability?
Even if TradeWeb winds up working with FIX for fixed income, it will
need to address compatibility with whatever post-trade standard emerges
to handle clearance and settlement. The BMA does not envision there
being one standard. As outlined in its RFP, the BMA's protocol effort
will handle the various steps in the trade cycle from IOIs, request for
quotes, notice of executions through allocations from buyers and
sellers to investor's sub-accounts. At that point, the fixed-income
protocol will hand off to another protocol that takes the trade to
clearance and settlement and statement of reconciliation. One of the
requirements for T+1 and straight-through processing is that the
protocol be compatible with XML-and the ISO 15022 data dictionary.
SWIFT is the keeper of the ISO 15022 data dictionary, but ISO 15022 is
not compatible with XML yet. ""One of the desirable characteristics of
this protocol is to be compatible with what's already in ISO 15022,""
According to a comment letter submitted by Robert Davies, securities
markets director for SWIFT, in response to the BMA's initiative,
""discussions have been initiated between FIX and SWIFT, paving the way
forward to a convergence of the FIX protocol and the ISO 15022
standards maintained by SWIFT.""
Dwight Arthur, a managing director of the Depository Trust &
Clearing Corporation, submitted a comment letter that urges the BMA
protocol initiative to leverage the existing standards work based on
ISO 15022 that is already taking place on the post-trade side for
government securities, European sovereign debt, emerging markets debt,
mortgage backed securities as well as corporate and municipal bonds.
The letter voices support for the ISO 15022 XML Working Group (WG10)
initiative, ""which seeks to create a basis in XML for interoperability
and convergence among the various financial services protocols.""
From a pragmatic standpoint, where does this lead in the STP world?
""I don't think I want to use half my stuff SWIFT and half my stuff FIX
and half my stuff XML,"" says a bond e-commerce executive who would
like to see XML emerge as a common standard.
One theory suggests that TradeWeb will take the FIX for Fixed Income
protocol and combine it with XML. ""I believe at least TradeWeb will
benchmark our efforts, and limit the increase in message size,"" says
Doscas, who notes that's the biggest hurdle for XML right now.
""If they start with FIX and kind of massage it a little, maybe add
some additional text coding to it to make it more flexible that's
something that would help,"" he says. There have already been informal
discussions between the FIXML Working Group and the Fixed Income
Working Group about this, and they are already heading in this general
direction. The idea of integrating FIX and XML is currently underway
within FPML under the FIXML Working Group.Of course message size and
network impact are hurdles which will need consideration. The FIXML
working group offers another opportunity for the two organizations to
work together. Finally, the next release of FIX, FIX 4.3 will include
extensions for FIXML Syntax and Design Rules."" says Doscas. ""People
will definitely use FIXML over time. It fits perfectly with the T+1
initiative which also embraces XML,"" says Hagay Shefi, CEO of GoldTier
Technologies, an STP technology provider.
As the fixed-income protocol initiative evolves, those who are familiar
with the work of FIWG agree that the BMA can help expedite the process
but they hope that one fixed-income protocol emerges.
""If the FIX for fixed-income people continue on,"" and TradeWeb
creates a different flavor of FIX, ""then we're stuck supporting two
protocols. That makes it difficult for me,"" says Bob Moitoso, vice
president of business development sales and trading group, Thomson
Financial. Though Thomson will build whatever translation engines are
necessary to support two fixed-income protocols, ""We all would have
liked to have one protocol, that makes sense to me,"" says Moitoso.
But given the unique requirements of fixed-income securities, Shefi
doubts that one standard will emerge for fixed income. ""I do not
believe in the mother of all standards. I don't believe that one size
can fit all. I don't believe you can create a unified protocol that can
cater to everything from equities to fixed income to derivatives,"" he
says. Noting that each asset class has its own properties, and each
geography and market trades differently, he says, ""It's hard for me to
see how FIX as it stands now, or even with some modifications can
really accommodate all the unique requirements that fixed-income
Not withstanding all these opinions, the BMA's voluntary fixed-income
protocol initiative is proceeding. Whatever protocol faction or
convergence scenario the standard ends up representing, Senft and Levy
emphasize that the process of the build-out will be very open. ""We
want to be as inclusive as possible,"" says Senft. ""When the day comes
when we say 'version 1.0 of the fixed-income protocol is ready,' we
want buy-in from everyone,"" he says.