Electronic trading has been a part of the traditional finance industry for a while now, and it works. What is yet to be seen is how new financial technologies will be implemented alongside the older systems and if the big banks will accept them. bobsguide spoke to Tim Healy, FIX Trading Community Global Marketing & Communications Manager about what’s happening in trading tech and how innovative the sector really is.
What does FIX Trading Community do?
FIX stands for financial information eXchange. FIX is the messaging protocol used within the cash equity space, in futures and options, fixed income and FX and it’s a way for market participants to communicate with each other. Another element of the Community is our active working groups where industry players meet on a regular basis to address some of the issues in the marketplace, whether this is to do with workflow or new trends and how FIX can help to solve issues.
How has regulation made an impact on the trading industry since the financial crisis?
Regulation certainly brought the industry closer together. It is widely known now that what affects the big investment banks will also affect the much smaller players in the market, as well as everybody involved in the investment and trading process. The information on messaging protocols like ours is very useful to the regulators and those messages can be embellished and enhanced to give even more information and more clarity to regulators. In regard to the financial crisis, the direct result to those events has been more stringent regulation, but in terms of the day to day business, we as a community are not involved in how that affected trading volumes and relationships with counterparties in the market place. What I would say again, is that the crisis brought market players even closer together, and they understand that what threatens one institution could threaten another.
Is blockchain technology innovating the trading industry?
At the moment, blockchain is an area that institutions need to be educated about so that it can be used in the electronic trading space. Bitcoin has been associated with the retail sector, but it is now moving into the space that the big banks inhabit and they are absolutely committed to looking at how this new technology will make an impact. Whether this is at trade or post trade level, is uncertain. However, I think that the post trade space has picked up a lot of media coverage about how blockchain could make an impact, but I think for us there are a number of different aspects. At our next event, our discussions about blockchain technology will be primarily educational because although it is being talked about a lot, how much do people actually know about it?
How will electronic trading evolve in the future?
The growth of electronic trading has been huge but recently, people have been concerned about the lack of transparency in comparison to how systems worked ten years ago. Because of the sheer amount of trading completed electronically now, the need for any kind of human interaction is now absolutely minimal which has an effect on how business is transacted. How many people does the market actually need when this explosion in electronic trading has happened? Areas in which this has been shown is the cash equity space, and if you look at different asset classes, like fixed income and OTC derivatives that have always been dealt, as the name suggests, over the counter or over the phone. All of a sudden you have a move towards a centralised exchange which brings with it a huge shift of infrastructure and change in infrastructure for a lot of these banks.
What can we expect at the FIX Trading Community EMEA conference?
Throughout the day we will be looking at regulation, the post trade space, OTC derivatives, liquidity issues and a number of other challenges that the market is facing at the moment. We have a number of people that are coming in from the US, Europe and the UK that will be talking about the latest changes to the FIX protocol and how it is meeting regulatory requirements too.