FPL Allocations Breakfast Briefing:FPL Allocations Breakfast Briefing:Towards a new STP ModelTowards a new STP Model
Sponsored by:Sponsored by:
25 January 200525 January 2005
FIX Allocation & ConfirmationsFIX Allocation & Confirmations
Jim KayeJim Kaye
Goldman SachsGoldman Sachs
www.fixprotocol.org
FIX – A Quick BackgroundFIX – A Quick Background
• What is it?What is it?• Industry-owned messaging protocolIndustry-owned messaging protocol• 10 years old10 years old• De facto industry standard for front office communicationsDe facto industry standard for front office communications• Used by hundreds of market participantsUsed by hundreds of market participants
• How does it work?How does it work?• Defined messages using tag-value pairsDefined messages using tag-value pairs• Can be transmitted over any IP network (including the internet)Can be transmitted over any IP network (including the internet)• Uses a ‘session’ to handle authentication, message delivery and Uses a ‘session’ to handle authentication, message delivery and
recoveryrecovery• ‘‘Pessimistic’ protocol (acknowledgements required)Pessimistic’ protocol (acknowledgements required)
www.fixprotocol.org
Investment Manager
Broker Dealer
Settlement
Generate one or more orders
Fill/part fill some/all of the orders
Communicate allocation splits
Generate trade confirmations
Communicate ‘ready to book’
Affirm/reject allocations
Affirm/reject trade confirmations Settlement
SSIs
Pre-definedbooking rules
Fee/expensecalculations
Give-ups, step-outs, soft dollars
New order single
New order single
Execution reports
Execution reports
AllocationAllocation
Allocation ackAllocation ack
ConfirmationConfirmation
Confirmation ack
Confirmation ack
An Overview of FIX Allocations & ConfirmationsAn Overview of FIX Allocations & Confirmations
www.fixprotocol.org
Why Use FIX?Why Use FIX?
• Fits the process flow– Logical extension to FIX order routing flowsLogical extension to FIX order routing flows– Allocations often a front office functionAllocations often a front office function– Consistency of data from front to middle officeConsistency of data from front to middle office– Real time status availability through ‘ack’ messagesReal time status availability through ‘ack’ messages– Supports complex booking requirements arising from, e.g. self-directed Supports complex booking requirements arising from, e.g. self-directed
tradingtrading• Ease of implementation
– Opportunity to leverage existing technology investmentOpportunity to leverage existing technology investment– Open protocol – network/vendor independenceOpen protocol – network/vendor independence– Wide choice of technology suppliersWide choice of technology suppliers
• Data structures and standards– Flexible data structures for a changing environmentFlexible data structures for a changing environment– Simple mapping to ISO 15022/SWIFT delivery messagesSimple mapping to ISO 15022/SWIFT delivery messages– Timestamps and audit trailsTimestamps and audit trails
www.fixprotocol.org
Implementation – Things To Think AboutImplementation – Things To Think About
• Counterparty readiness– Can my trading counterparties support this?Can my trading counterparties support this?– If so, how?If so, how?
• Business process– Which products?Which products?– Which part(s) of the trade lifecycle?Which part(s) of the trade lifecycle?– Bilateral or central matchingBilateral or central matching– SSIs…?SSIs…?
• Technology– Existing infrastructureExisting infrastructure– NetworksNetworks– FIX engines etc.FIX engines etc.
www.fixprotocol.org
FIX engine
Case Study 1 – Fax to FIXCase Study 1 – Fax to FIX
Orders/ executions
Buy side order management system
FIX network
FIX engine
Buy side middle office system
Sell side order management system
Sell side middle office system
Fax machine
Allocations
Re-keyed…Issues:
• Not machine readable
• Prone to error
• No acknowledgements
Issues:
• Not machine readable
• Prone to error
• No acknowledgements
www.fixprotocol.org
FIX engine
Case Study 1 – Fax to FIX (ctd)Case Study 1 – Fax to FIX (ctd)
Orders/ executions
Buy side order management system
FIX network
FIX engine
Buy side middle office system
Sell side order management system
Sell side middle office systemAllocations
Issues:
• Machine readable
• Can be processed automatically
• Real time acknowledgements
Issues:
• Machine readable
• Can be processed automatically
• Real time acknowledgements
FIX engine
www.fixprotocol.org
Case Study 1 - ImplementationCase Study 1 - Implementation
• Counterparty readiness– Many sell side firms support this modelMany sell side firms support this model– In place for a number of major buy side firmsIn place for a number of major buy side firms
• Business process– Currently in use for equities/PTCurrently in use for equities/PT– Generally used in conjunction with Global OASYSGenerally used in conjunction with Global OASYS
• Technology– Many off-the-shelf OMS providers support this modelMany off-the-shelf OMS providers support this model– Some middle office system providers also support thisSome middle office system providers also support this– Most FIX networks support thisMost FIX networks support this– Zero messaging cost; low/zero implementation cost (apart from Zero messaging cost; low/zero implementation cost (apart from
testing time)testing time)
BUSINESS ENTITY IDENTIFICATIONBUSINESS ENTITY IDENTIFICATION- REFERENCE DATA AND FIX 4.4- REFERENCE DATA AND FIX 4.4
Simon Leighton-PorterSimon Leighton-Porter
VSAF.NETVSAF.NET
www.fixprotocol.org
FIX and Reference DataFIX and Reference Data
• FIX and reference data seems like an odd combinationFIX and reference data seems like an odd combination• Why the emphasis on reference data when discussing a Why the emphasis on reference data when discussing a
communications protocol?communications protocol?• Without standardisation and accuracy of reference data, any Without standardisation and accuracy of reference data, any
processing architecture is merely so much junkprocessing architecture is merely so much junk
www.fixprotocol.org
TAKING A BROADER VIEWTAKING A BROADER VIEW
• SO, WHAT ARE OUR AIMS IN DOING THIS STUFF?SO, WHAT ARE OUR AIMS IN DOING THIS STUFF?• REDUCE COSTREDUCE COST• REDUCE RISKREDUCE RISK
Client take-on
Sales andtrading
Trade-date processing
Settlement
FIX
BUSINESS ENTITY IDENTIFIERS
www.fixprotocol.org
SQUARING THE CIRCLESQUARING THE CIRCLE
• COMPONENTS OF A SUCCESSFUL, FIX-BASED POST-EXECUTION COMPONENTS OF A SUCCESSFUL, FIX-BASED POST-EXECUTION MESSAGING ARCHITECTUREMESSAGING ARCHITECTURE– Hardware and applicationsHardware and applications– ConnectivityConnectivity– Interoperability and flexibility within a framework of well-Interoperability and flexibility within a framework of well-
defined standardsdefined standards– MatchingMatching– Business Process Management (BPM)Business Process Management (BPM)
– CONTENT CONTENT - - turn all the talk about data standardisation turn all the talk about data standardisation into reality by providing an identifier that supports the entire into reality by providing an identifier that supports the entire business process and is flexible enough to be used in any business process and is flexible enough to be used in any processing modelprocessing model
• So, what does one of those look like?So, what does one of those look like?
www.fixprotocol.org
IBEI DefinedIBEI Defined
• International Business Entity Identifier: ISO 16372International Business Entity Identifier: ISO 16372
““IBEI is a global scheme for uniquely identifying business entities playing 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 role in the lifecycle of, and events related to, a financial instrument”
““A business entity is an entity that is either A business entity is an entity that is either regulatedregulated or on which or on which due due diligence is necessarydiligence is necessary under any jurisdiction” under any jurisdiction”
ISO TC68 SC4 WG8 Feb 2004ISO TC68 SC4 WG8 Feb 2004
www.fixprotocol.org
IBEI ModelIBEI Model• Central utilityCentral utility• Concept of sponsorshipConcept of sponsorship• Core information will be free or available at very low cost Core information will be free or available at very low cost • Data quality maintained byData quality maintained by
– Multi-source informationMulti-source information– ““Triggers”Triggers”– TwilightingTwilighting– Sponsor updatesSponsor updates– Information from IBEI entities and IBEI usersInformation from IBEI entities and IBEI users
• NONO LICENCE FEES LICENCE FEES• Value-added information will be available at additional costValue-added information will be available at additional cost
– Cross-references to other commercial data sourcesCross-references to other commercial data sources• Scope for future developmentsScope for future developments
– Settlement instructionsSettlement instructions– Payment instructionsPayment instructions– Compliance-related informationCompliance-related information
www.fixprotocol.org
Role of the SponsorRole of the Sponsor
• Centralised, using sponsorsCentralised, using sponsors
RegistrationAuthority
Applicant
Sponsor
IBEI REQUESTIBEI ALLOCATION
www.fixprotocol.org
IBEI VALUE-ADDSIBEI VALUE-ADDS
• REDUCE COSTREDUCE COST• REDUCE RISKREDUCE RISK• SUPPORTS USE OF FIX POST-EXECUTIONSUPPORTS USE OF FIX POST-EXECUTION
Client take-on
Sales andtrading
Trade-date processing
Settlement
FIX
BUSINESS ENTITY IDENTIFIERS
www.fixprotocol.org
IBEI SUPPORTS SSI FRESHIBEI SUPPORTS SSI FRESH
• REDUCED COST AND RISK OF CLIENT TAKE-ON (Common to all REDUCED COST AND RISK OF CLIENT TAKE-ON (Common to all processing models)processing models)
• AGREED RANGE OF IDENTIFIERS FOR ENTITIESAGREED RANGE OF IDENTIFIERS FOR ENTITIES• IBEI CAN BE USED TO IDENTIFY LEGAL ENTITY, ALLOCATED IBEI CAN BE USED TO IDENTIFY LEGAL ENTITY, ALLOCATED
ACCOUNT ETCACCOUNT ETC• POTENTIAL USE AS SSI FRESH DATABASE TO SUPPORT MODEL 1POTENTIAL USE AS SSI FRESH DATABASE TO SUPPORT MODEL 1
Buyside Sellside
Global Custodian
Local agent (I)CSD Local agent
Allocation enriched with SSIs and, ideally, net money
Confirmation (1 per account) enriched with SSIs x2 and net money
Affirmation
MATCH
MATCH?
SSI Database
SSI updates
www.fixprotocol.org
IntroductionIntroduction
• SSI data within the FIX Allocation & Confirmation message flowSSI data within the FIX Allocation & Confirmation message flow
• Electronic Capture of Standing Settlement Instructions (SSI)Electronic Capture of Standing Settlement Instructions (SSI)
• Scottish Statutory Instrument (SSI) 2002 No. 39 Scottish Statutory Instrument (SSI) 2002 No. 39 The Sheep and Goats The Sheep and Goats Identification (Scotland) Amendment Regulations 2002Identification (Scotland) Amendment Regulations 2002
www.fixprotocol.org
Model 1 – Buyside involved in SSIsModel 1 – Buyside involved in SSIs
Buyside Sellside
Global Custodian
Local agent (I)CSD Local agent
Allocation + SSIs (inc PSET) & net money (ideally)
Confirmation (1 per account) + SSIs x2 and net money
Affirmation
MATCH
MATCH?
SSI updates
Notes:
• Needs FIX 4.4 for Allocation
•And FIX 4.4 or SWIFT MT515 for Confirmation
Notes:
• Needs FIX 4.4 for Allocation
•And FIX 4.4 or SWIFT MT515 for Confirmation
www.fixprotocol.org
FIX 4.4 SSIs in the Allocation messageLevel 0 Level 1 Level 2
Message Body
Contains 1 Message Definition Defines type and purpose of message and contains
message identifiers Contains Many
Orders
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.
Contains 1
Booking Unit
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 0 or many
Allocation Details
Contains 1 Commission Details
Fields defining commissions (either a rate or an absolute value)
Contains 0 or one Trade Net Monies Optional fields defining net monies and settlement
amount
Contains 0 or many Fees Optional repeating group defining fee and expense
details
Contains 0 or many
Settlement Instructions
Optional repeating group defining buy and/or sell side settlement instructions. See section below.
www.fixprotocol.org
FIX 4.4 SSIs in the Confirmation message
Level 0 Level 1
Message Body Contains1 Message Definition Defines type and purpose of message and contains message
identifiers Contains1 Firm Identification &
PSET
Contains1 Instruction Identification
Contains1 Instrument Detail Contains1 Trade Identification Text is in this group although it would be better placed in
Message Body Contains1 Trade Net Monies Contains 0 or many
Settlement Instructions
Repeating group defining buy and/or sell side settlement instructions
Contains1 Commission Details Fields defining commissions (either a rate or an absolute value) Contains 0 or many Fees Optional repeating group defining fee and expense details
www.fixprotocol.org
SSI baggage in FIXISO 15022 Def
SettlPartyIDRole <784>
SettlPartyIDSource <783>
SubIDType <786>
PSET 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 outModel 2 – Buyside opt out
Buyside Sellside
Global Custodian
Local agent (I)CSD Local agent
Allocation + Custodian & net money (ideally)
Confirmation (1 per account) + SSIs x2 and net money
Affirmation – needed?
MATCH
SSI updates
Notes:
• Can use FIX 4.2 for Allocation
•And SWIFT MT515 for Confirmation
•Or FIX 4.4 for both
Notes:
• Can use FIX 4.2 for Allocation
•And SWIFT MT515 for Confirmation
•Or FIX 4.4 for both
www.fixprotocol.org
Model 3 – Centralised SSIModel 3 – Centralised SSI
Buyside Sellside
Global Custodian
Local agent (I)CSD Local agent
SSI updates
www.fixprotocol.org
SSIs - building solutionsSSIs - building solutions
• STPLiteSTPLite
• SSI FreshSSI Fresh
• Solutions Providers – many “harolds”Solutions Providers – many “harolds”
• Generally accept:Generally accept:– custodian holds and maintains SSI data custodian holds and maintains SSI data – data automatically issued to “local” or “central” databasedata automatically issued to “local” or “central” database– adhoc query and responseadhoc query and response– real time access to custodian on a trade by trade basis NOT real time access to custodian on a trade by trade basis NOT
necessarynecessary
www.fixprotocol.org
SSI - dataSSI - data
• Query dataQuery data– NumberNumber– Country or Place Fund Manager IDCountry or Place Fund Manager ID– Custody Account of SettlementCustody Account of Settlement– Side (Buy/Sell)Side (Buy/Sell)– Product, Security Identifier and TypeProduct, Security Identifier and Type– Effective date/timeEffective date/time
• Response or Pushed dataResponse or Pushed data– Cross-references to query (forming the “key” fields)Cross-references to query (forming the “key” fields)– SSI Detail:SSI Detail:
• PSETPSET• Agent and Agent Account at place of settlementAgent and Agent Account at place of settlement• CustodianCustodian
www.fixprotocol.org
SSIs – need for data standardSSIs – need for data standard
• Delivery mechanism may varyDelivery mechanism may vary– FIX/FIXMLFIX/FIXML– SWIFTSWIFT– FileFile
• Need to ensure we have an SSI data standard – clones like “Dolly”Need to ensure we have an SSI data standard – clones like “Dolly”
• SSIs for cash settlementSSIs for cash settlement
• Nothing to do with sheep and goat identification and Scottish Nothing to do with sheep and goat identification and Scottish Statutory Instrument regulationsStatutory Instrument regulations