Transcript FPL Presentation - FIX Trading Community

FPL Allocations Breakfast Briefing:
Towards a new STP Model
Sponsored by:
25 January 2005
FIX Allocation & Confirmations
Jim Kaye
Goldman Sachs
FIX – A Quick Background
•
What is it?
• Industry-owned messaging protocol
• 10 years old
• De facto industry standard for front office communications
• Used by hundreds of market participants
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How does it work?
• Defined messages using tag-value pairs
• Can be transmitted over any IP network (including the internet)
• Uses a ‘session’ to handle authentication, message delivery and recovery
• ‘Pessimistic’ protocol (acknowledgements required)
www.fixprotocol.org
An Overview of FIX Allocations & Confirmations
Give-ups,
step-outs,
soft dollars
Pre-defined
booking rules
New order
single
SSIs
Generate one or more
orders
Fill/part fill some/all of the orders
Fee/expense
calculations
Execution
reports
Communicate ‘ready to book’
Allocation
Communicate allocation splits
Investment
Manager
Confirmation
ack
Settlement
Allocation ack
Affirm/reject allocations
Confirmation
Broker
Dealer
Generate trade confirmations
Affirm/reject trade confirmations
www.fixprotocol.org
Settlement
Why Use FIX?
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Fits the process flow
– Logical extension to FIX order routing flows
– Allocations often a front office function
– Consistency of data from front to middle office
– Real time status availability through ‘ack’ messages
– Supports complex booking requirements arising from, e.g. self-directed trading
Ease of implementation
– Opportunity to leverage existing technology investment
– Open protocol – network/vendor independence
– Wide choice of technology suppliers
Data structures and standards
– Flexible data structures for a changing environment
– Simple mapping to ISO 15022/SWIFT delivery messages
– Timestamps and audit trails
www.fixprotocol.org
Implementation – Things To Think About
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Counterparty readiness
– Can my trading counterparties support this?
– If so, how?
Business process
– Which products?
– Which part(s) of the trade lifecycle?
– Bilateral or central matching
– SSIs…?
Technology
– Existing infrastructure
– Networks
– FIX engines etc.
www.fixprotocol.org
Case Study 1 – Fax to FIX
Buy side order
management
system
FIX engine
Orders/
executions
Sell side order
management
system
FIX engine
FIX network
Buy side
middle office
system
Fax machine
Sell side middle
office system
Allocations
Issues:
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• Not machine readable
Re-keyed…
• Prone to error
• No acknowledgements
www.fixprotocol.org
Case Study 1 – Fax to FIX (ctd)
Buy side order
management
system
FIX engine
Orders/
executions
Sell side order
management
system
FIX engine
FIX network
Buy side
middle office
system
FIX engine
Sell side middle
office system
Allocations
Issues:



• Machine readable
• Can be processed automatically
• Real time acknowledgements
www.fixprotocol.org
Case Study 1 - Implementation
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Counterparty readiness
– Many sell side firms support this model
– In place for a number of major buy side firms
Business process
– Currently in use for equities/PT
– Generally used in conjunction with Global OASYS
Technology
– Many off-the-shelf OMS providers support this model
– Some middle office system providers also support this
– Most FIX networks support this
– Zero messaging cost; low/zero implementation cost (apart from testing time)
www.fixprotocol.org
BUSINESS ENTITY IDENTIFICATION
- REFERENCE DATA AND FIX 4.4
Simon Leighton-Porter
VSAF.NET
FIX and Reference Data
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FIX and reference data seems like an odd combination
Why the emphasis on reference data when discussing a communications
protocol?
Without standardisation and accuracy of reference data, any processing
architecture is merely so much junk
www.fixprotocol.org
TAKING A BROADER VIEW
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SO, WHAT ARE OUR AIMS IN DOING THIS STUFF?
REDUCE COST
REDUCE RISK
Client
take-on
Sales and
trading
Trade-date
processing
FIX
BUSINESS ENTITY IDENTIFIERS
www.fixprotocol.org
Settlement
SQUARING THE CIRCLE
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COMPONENTS OF A SUCCESSFUL, FIX-BASED POST-EXECUTION
MESSAGING ARCHITECTURE
– Hardware and applications
– Connectivity
– Interoperability and flexibility within a framework of well-defined
standards
– Matching
– Business Process Management (BPM)
– CONTENT - turn all the talk about data standardisation into
reality by providing an identifier that supports the entire business
process and is flexible enough to be used in any processing model
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So, what does one of those look like?
www.fixprotocol.org
IBEI Defined
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International Business Entity Identifier: ISO 16372
“IBEI is a global scheme for uniquely identifying business entities playing a
role in the lifecycle of, and events related to, a financial instrument”
“A business entity is an entity that is either regulated or on which due
diligence is necessary under any jurisdiction”
ISO TC68 SC4 WG8 Feb 2004
www.fixprotocol.org
IBEI Model
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Central utility
Concept of sponsorship
Core information will be free or available at very low cost
Data quality maintained by
– Multi-source information
– “Triggers”
– Twilighting
– Sponsor updates
– Information from IBEI entities and IBEI users
NO LICENCE FEES
Value-added information will be available at additional cost
– Cross-references to other commercial data sources
Scope for future developments
– Settlement instructions
– Payment instructions
– Compliance-related information
www.fixprotocol.org
Role of the Sponsor
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Centralised, using sponsors
Registration
Authority
Sponsor
IBEI ALLOCATION
IBEI REQUEST
Applicant
www.fixprotocol.org
IBIE Repository Data Content
www.fixprotocol.org
IBEI VALUE-ADDS
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REDUCE COST
REDUCE RISK
SUPPORTS USE OF FIX POST-EXECUTION
Client
take-on
Sales and
trading
Trade-date
processing
FIX
BUSINESS ENTITY IDENTIFIERS
www.fixprotocol.org
Settlement
IBEI SUPPORTS SSI FRESH
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REDUCED COST AND RISK OF CLIENT TAKE-ON (Common to all
processing models)
AGREED RANGE OF IDENTIFIERS FOR ENTITIES
IBEI CAN BE USED TO IDENTIFY LEGAL ENTITY, ALLOCATED ACCOUNT
ETC
POTENTIAL USE AS SSI FRESH DATABASE TO SUPPORT MODEL 1
www.fixprotocol.org
Buyside Allocation enriched with SSIs and, Sellside
ideally, net money
MATCH
SSI
Database
Confirmation (1 per account)
enriched with SSIs x2 and net
money
MATCH?
SSI updates
Affirmation
Global
Custodian
Local agent
(I)CSD
Local agent
SSIs
Alvin Mullan
UBS Investment Bank
Introduction
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SSI data within the FIX Allocation & Confirmation message flow
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Electronic Capture of Standing Settlement Instructions (SSI)
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Scottish Statutory Instrument (SSI) 2002 No. 39
Identification (Scotland) Amendment Regulations 2002
www.fixprotocol.org
The Sheep and Goats
Model 1 – Buyside involved in SSIs
Buyside Allocation + SSIs (inc PSET) &
Sellside
net money (ideally)
MATCH
Confirmation (1 per account) +
SSIs x2 and net money
MATCH?
Affirmation
SSI updates
Notes:
• Needs FIX 4.4 for
Allocation
•And FIX 4.4 or SWIFT
MT515 for Confirmation
Global
Custodian
Local agent
www.fixprotocol.org
(I)CSD
Local agent
FIX 4.4 SSIs in the Allocation message
Level 0
Message
Body
Contains 1
Level 1
Level 2
Message
Definition
Defines type and purpose of message and contains
message identifiers
Optional repeating group identifying the orders being
booked and/or allocated together with their price and
quantity being booked/allocated. This is mandatory in
FIX but is currently should have at least one occurrence
on a message to UBS.
Defines the booking unit being booked and/or
allocated (e.g. security, side, price, trade date)
TransactTime is included here although viewed as
being part of the Message Definition section.
Contains
Many
Orders
Contains 1
Booking Unit
Contains 0
or many
Allocation
Details
Contains 1
Contains 0 or
one
Contains 0 or
many
Contains 0 or
many
Commission
Details
Fields defining commissions (either a rate or an
absolute value)
Optional fields defining net monies and settlement
Trade Net Monies
amount
Optional repeating group defining fee and expense
Fees
details
Settlement
Optional repeating group defining buy and/or sell side
Instructions
settlement instructions. See section below.
www.fixprotocol.org
FIX 4.4 SSIs in the Confirmation message
Level 0
Message Body
Contains1
Contains1
Contains1
Contains1
Contains1
Contains1
Contains 0 or
many
Contains1
Contains 0 or
many
Level 1
Message Definition
Defines type and purpose of message and contains message
identifiers
Firm Identification &
PSET
Instruction
Identification
Instrument Detail
Trade Identification
Text is in this group although it would be better placed in
Message Body
Trade Net Monies
Settlement
Instructions
Commission Details
Repeating group defining buy and/or sell side settlement
instructions
Fields defining commissions (either a rate or an absolute value)
Fees
Optional repeating group defining fee and expense details
www.fixprotocol.org
SSI baggage in FIX
ISO 15022
Def
PSET
SettlPartyIDRole
SettlPartyIDSource SubIDType
<784>
<783>
<786>
10 = Settlement Location B = BIC
DEAG/REAG 30 = Agent or
4 = Clearing Firm
(But only 1 of)
B = BIC
10 = Securities Account
Number
22 = Securities Account
Name
17 = CSD participant/member
code
DECU/RECU 28 = Custodian or
31 = Sub-Custodian
(But only 1 of)
B = BIC
10 = Securities Account
Number
22 = Securities Account
Name
11 = Registration number
14 = Registration name
17 = CSD participant/member
code
BUYR/SELL
27 = Buyer/Seller
www.fixprotocol.org
Model 2 – Buyside opt out
Buyside Allocation + Custodian & net
Sellside
money (ideally)
MATCH
Confirmation (1 per account) +
SSIs x2 and net money
Affirmation – needed?
Notes:
• Can use FIX 4.2 for
Allocation
Global
Custodian
SSI
updates
•And SWIFT MT515 for
Confirmation
•Or FIX 4.4 for both
Local agent
(I)CSD
www.fixprotocol.org
Local agent
Model 3 – Centralised SSI
Sellside
Buyside
SSI
updates
Global
Custodian
Local agent
(I)CSD
www.fixprotocol.org
Local agent
SSIs - building solutions
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STPLite
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SSI Fresh
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Solutions Providers – many “harolds”
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Generally accept:
– custodian holds and maintains SSI data
– data automatically issued to “local” or “central” database
– adhoc query and response
– real time access to custodian on a trade by trade basis NOT necessary
www.fixprotocol.org
SSI - data
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Query data
– Number
– Country or Place Fund Manager ID
– Custody Account of Settlement
– Side (Buy/Sell)
– Product, Security Identifier and Type
– Effective date/time
Response or Pushed data
– Cross-references to query (forming the “key” fields)
– SSI Detail:
• PSET
• Agent and Agent Account at place of settlement
• Custodian
www.fixprotocol.org
SSIs – need for data standard
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Delivery mechanism may vary
– FIX/FIXML
– SWIFT
– File
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Need to ensure we have an SSI data standard – clones like “Dolly”
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SSIs for cash settlement
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Nothing to do with sheep and goat identification and Scottish Statutory
Instrument regulations
www.fixprotocol.org
Any Questions?
FPL would like to thank
the sponsors of this event:
25 January 2005