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Frequently Asked Questions about FIX

Q: What is the FIX Protocol?

The Financial Information eXchange (FIX) Protocol is a "language" which defines specific kinds of electronic messages for communicating securities transactions between two parties. FIX defines only the format of the messages and the session-level interaction between two applications -- it is not a software application in its own right.

Q: Who owns FIX?

The FIX Protocol is not owned by any legal entity. Rather, it is maintained and improved by a committee structure comprised of fund managers, brokers, and other industry participants.

Q: Why use FIX?

FIX is a relatively easy-to-implement, open standard for communicating financial information in a secure but nonproprietary way between two parties. Increasingly, implementations are available from vendors in the form of toolkits or FIX-enabled software packages.

Q: What is the difference between FIX and OFX?

Both FIX and OFX were designed to communicate financial information. The resemblance between the two protocols doesn't go much further than that at present. OFX is very retail-focused, while FIX targets institutional business. At a more technical level, OFX is a query-response protocol much like HTTP, while FIX is a connected, session-based protocol.

Q: How can I FIX-enable my systems?

A FIX "gateway" can be written from scratch or purchased in the form of a toolset from a number of vendors. Obtaining a FIX gateway by either of these avenues is the first step towards FIX-enabling proprietary systems. Alternatively, more and more vendors of order-management software and information networks are providing FIX capabilities to their customers out-of-the-box.

Q: Is FIX year-2000 compliant?

FIX 4.0 and later won't be affected come the new millenium, since they identify dates in a YYYYMMDD format which won't rollover until the year 10,000 (long after we're gone). However, it is important to understand that FIX is just a pipe -- the systems on either side of the FIX connection must also be 2000-proof.

More Frequently Asked Questions about FIX

1. How will use of FIX improve access to liquidity for market participants?
2. How will use of FIX aid price discovery and promote price improvement?
3. I am a portfolio manager. How does FIX help me?
4. I am a salesman. How does FIX help me?
5. Will greater connectivity among market participants disintermediate broker-dealers?
6. How long will it take for FIX to become a communications standard in the fixed-income market?
7. With whom am I able to communicate via FIX?
8. What do I need in order to "talk" FIX with my trading partners?
9. How does FIX relate to the Internet?
10. How has the Bond Market Association assisted the protocol process?
11. Does FIX work with XML?
12. What about the ISO 15022?
13. How does FIX fit into my existing infrastructure?
14. What will be the cost of modifying my infrastructure to enable FIX communications, and what are the incremental support costs?
15. Doesn't FIX imply multiple, point-to-point circuits? Isn't that expensive?
16. Do I need a VPN for FIX communications?
17. How does FIX (for fixed income) relate to the new SWIFT messaging hub?

1. How will use of FIX improve access to liquidity for market participants?

Sellers want to obtain the best available price for a security in the shortest possible time. By enabling the electronic exchange of trade-related information, FIX compresses the time needed to discover price and transact. It is open to everyone and already used by many investors and dealers.

2. How will use of FIX aid price discovery and promote price improvement?

FIX makes it fast and easy to discover market depth across as many prospective trade counterparties as you wish. You can contact multiple counterparties - investors, dealers, alternative trading systems - with a single message, requesting or showing bids and offers as you please. Reach more people in less time, while reducing your dependency on proprietary solutions.

3. I am a portfolio manager. How does FIX help me?

First, you will use FIX to power your analytics with relevant, real-time data. Then, whether you are looking to lock in an attractive spread between two securities or to re-balance your portfolio across multiple positions, the speed of price discovery and trading that FIX affords works to ensure that your investment in analytics and time spent working up trade scenarios are rewarded with realizable trades.

4. I am a salesman. How does FIX help me?

Time is your most precious resource. FIX enables you and your support team to spend more time on high-value activities and less on error-prone, mechanical processes.

5. Will greater connectivity among market participants disintermediate broker-dealers?

In and of itself, connectivity is not a disintermediator. While greater connectivity may mean a more competitive environment for broker-dealers, it also provides them with new ways of satisfying customers and differentiating their services.

6. How long will it take for FIX to become a communications standard in the fixed-income market?

Uptake will be gradual at first, then quicken exponentially. Based on the current rate of adoption, many industry observers think that FIX should be widely accessible and acceptable for fixed-income trading within the next 24 to 48 months. Begin your FIX planning and development now in order to realize its benefits within the next two years.

7. With whom am I able to communicate via FIX?

Hundreds of firms are already FIX-enabled and ready to communicate with you via FIX. This includes virtually all of the primary dealers and major alternative trading systems, as well as many of the largest fund complexes and money-management firms. To promote wider use of the protocol, many firms post details of their FIX communications capabilities on the FPL website. This information is readily accessible via the "Protocol Usage" link from the FPL home page.

8. What do I need in order to "talk" FIX with my trading partners?

Communicating via FIX is easy and cost-effective. You will need a FIX engine or service capable of sending, receiving, and interpreting FIX messages. You can build or buy your own engine, subscribe to a FIX network or message hub, or may even have trading partners who will provide "free" FIX connectivity as a value-added service. Specifications and vendors are readily accessible through the FIX Protocol Ltd. ("FPL") website: http://www.fixprotocol.org.

9. How does FIX relate to the Internet?

The Internet is already used for FIX-based trading. Counterparties using the Internet typically encrypt their FIX communications, using methods such as SSL or STunnel. Over time, the Internet will likely be used even more as a transport medium for FIX messages. Providers of FIX message hubs, for example, are planning to allow Internet connections to their hubs. The development of FIX-based web services is also expected.

10. How has the Bond Market Association assisted the protocol process?

Since 2001, The Bond Market Association ("TBMA") has provided access to valuable fixed income business professionals, for help in developing the protocol. These professionals include traders, portfolio managers, and operations personnel, who lead efforts in developing the plain language documents used to ensure the relevancy of the protocol to actual business practices.

Over the last two years the cooperation between FPL and the TBMA has moved protocols efforts ahead at an expedited rate due to the initiative, resources and marketing of both organizations. http://www.bondmarkets.com

11. Does FIX work with XML?

Efforts are underway within the FIX community to add the advantages of interoperability, which is a chief benefit of XML. Earlier releases of an XML based FIX protocol (FIXML) contain DTDs and schemas which support XML. The schemas will continue to be modified to support all products supported by FIX, including for the release of FIX 4.4 in 1Q03.

12. What about the ISO 15022?

FPL and SWIFT announced in July of 2001 a "Statement of Understanding." The two organizations agreed to improve interoperability between front end trading and back office trade processing. They agreed on the use of ISO 15022 XML as the vehicle for interoperability. To date the two groups have completed an IOI (Offerings) Message Model and are in the process of completing a Quote Message Model and Order Message Model.

The reverse engineering effort between FIX and SWIFT will result in an ISO 15022 standards repository of message models, business roles/participants, business rules, XML message schemas, and a data dictionary. A convergence table between FIX and the new ISO 15022 XML will also be provided to the community as part of the effort. This documentation will be made available once approved by FPL, SWIFT, and ISO.

13. How does FIX fit into my existing infrastructure?

FIX defines both a session layer (the logon/logout and heartbeat messages, for example) and an application layer (such as the NewOrder, ExecutionReport, Allocation, and IOI messages). These are independent of the communication or transport protocol (i.e., TCP/IP or X.25 or any other networking protocol). Also, the FIX session and application layers have been designed to be independent of one another. This means that a user may adopt only the application layer protocol and use his existing middleware technology (i.e., TIB/RV or IBM MQ Series) as the session layer.

14. What will be the cost of modifying my infrastructure to enable FIX communications, and what are the incremental support costs?

This depends on factors such as (i) whether you presently have any FIX capabilities at all, (ii) already use FIX for stock trading, (iii) wish to have a unified FIX capability for multiple asset classes or else to have separate FIX capabilities for each asset class, (iv) prefer to build or buy your own FIX engine, or (v) choose to subscribe to a FIX network or message hub. Costs estimates from several vendors begin as low as $5,000 and move up the price range based on architecture and design requirements. Your preferences with respect to front-end applications will also affect costs. If you do not already have an order management system ("OMS"), for example, you may wish to buy or build one. Alternatively, several vendors provide inexpensive solutions for FIX-enabling your Excel spreadsheets.

15. Doesn't FIX imply multiple, point-to-point circuits? Isn't that expensive?

FIX works across existing networks as well as newer connectivity methods, such as message hubs. It is a language, not a transport mechanism, so does not in and of itself increase your network/connectivity costs.

You do, of course, need connectivity in order to use FIX. Traditionally, market participants have deployed dedicated circuits for message transport, and FIX is fully compatible with that approach. Message hubs provided by firms such as SunGard and SWIFT have become very popular for FIX communications within the stock market and are being adapted to fixed-income trading. Thomson's AutEx.FI system will soon feature FIX connectivity. Firms such as Radianz, TNS, and Savvis provide a third alternative - private networks linking multiple, FIX-enabled counterparties, with each requiring only a single connection to the network.

16. Do I need a VPN for FIX communications?

A virtual private network ("VPN") is merely one transport alternative for your FIX communications, to be used only if that best suits your needs. Many firms will find a VPN to be the most convenient and economical method of connecting with other FIX-enabled firms. You may prefer one or more dedicated connections or a combination of the VPN and dedicated circuits.

17. How does FIX (for fixed income) relate to the new SWIFT messaging hub?

The SWIFTNet FIX Hub, provided as a service to SWIFT members and others within the financial community, provides FIX messaging consistent with published FIX standards. The hub presently supports FIX 4.0 through FIX 4.2. In the future, SWIFT plans to support FIX 4.3 and 4.4.