What is the exchange of financial information?
Financial Information eXchange (FIX) is a vendor-independent electronic communication protocol for the international real-time exchange of securities transaction information. The protocol is used by the FIX community which includes nearly 300 member companies, including all the major investment banks. FIX has become the de facto messaging standard for pre-trade, commercial and post-trade communications, as well as for US regulatory reports. It is compatible with almost all commonly used network technologies. FIX Protocol, Ltd. owns and manages the FIX system. The company was created entirely to achieve this goal and to ensure that the system remains in the public domain.
Key points to remember
- The exchange of financial information (FIX) is an information and data protocol.
- The FIX Trading Community is the non-profit entity created to ensure that FIX continues to be in the public domain.
- FIX is the standard for front office messaging.
Understanding the exchange of financial information (FIX)
FIX communications include SMS and e-mails, distribution of securities transactions, news, order submissions and modification, advertising and execution reports. Primarily used for business-to-business interactions, it is designed to improve business messages and the flow of transactions. FIX achieves this goal by minimizing redundancy and reducing the time spent on telephone communications, written messages, transactions, and documentation. The benefits are particularly evident for funds, investment managers and investment banking companies. FIX systems transfer precise and timely financial information regarding securities transactions through and between brokerage firms.
Introduced in 1992 for the trading of shares between Salomon Brothers and Fidelity Investments, the FIX protocol is also becoming a standard in the trading of options and futures. It was implemented to enable more efficient and accountable transactions and record keeping, replacing a system that was managed primarily by telephone. In the old system, indications of interest were often lost “pending” or routed to the wrong merchant. FIX has become the standard electronic protocol for pre-negotiation communications and transaction execution.
It should be noted that the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the standard for back office messaging, FIX is the standard for front office messaging.
Financial information exchange users
The FIX is popular with buyers (institutions) and sellers (brokers / dealers) in the financial markets. Users include mutual funds, investment banks, brokers, stock exchanges and other electronic communication networks (ECN). It is mainly used for equity transactions, although it can handle bond, foreign exchange and derivative transactions.
The collaborative efforts of FIX Trading Community ™ member companies maintain and continue to develop the FIX messaging standard. Members of the FIX community include several leading financial institutions around the world. The work done by these member firms ensures that the standard continues to evolve to meet new and emerging business requirements. Their actions also promote the adoption of the use of FIX worldwide. The FIX protocol itself is a non-proprietary, free and open standard that is constantly developed by its member companies.
What is the next step for FIX?
FIX is a constantly evolving entity and seeks to keep abreast of changes in industry and technology. In early 2020, members discuss current issues and challenges, including cybersecurity, digital currencies and blockchain, transparency in execution and improved performance.
Any business considering using FIX may wish to download the FIX implementation guide from the FIX business community website.