Matt Barrett

Speaking to The TRADE, Matt Barrett, chief executive and co-founder of Adaptive, explains: “From simplifying client onboarding to seamlessly integrating order flow when building custom front-office trading systems, the value this will provide to clients can’t be overstated. 

“[…] At Adaptive, we have a long-standing reputation for providing customers with best-in-class trading systems. With this new partnership, we will be able to go beyond the capabilities of standard FIX engines, creating even more comprehensive, agile and robust solutions for capital markets firms.” 

The integration is being made possible through Adaptive’s open-source messaging and clustering technology, Aeron. 

Paul Weiss, chief technology officer, Adaptive, adds: ”Aeron technology is specifically designed to help even the most complex of capital markets firms build fault-tolerant, high-performance trading technology successfully. As Rapid Addition’s platform is built on Aeron technology, we share the same technological building blocks – there are therefore huge synergies between our businesses. 

“Our Aeron expertise and Rapid Addition’s FIX expertise gives clients a greater depth of knowledge and new capabilities that will make a meaningful difference to their businesses.”  

Rapid Addition’s scalable FIX platform can handle thousands of connections and provides support for all versions of the the Financial Information Exchange (FIX) protocol – as well as “custom rules of engagement”.

Owned by the FIX Trading Community, the protocol was designed in an attempt to simplify workflows and reduce error by creating an industry standard adopted by all. Through their new partnership, Adaptive will “build bespoke front-office trading systems with complex, global, high-volume connectivity requirements beyond the capabilities of standard FIX engines, creating more comprehensive, agile and robust solutions for capital markets clients”.

Read more: Fireside Friday with… FIX Trading Community’s Jim Kaye

This collaboration claims to enable firms to simplify counterparty FIX onboarding and order routing workflow and comes as the market continues to see increasing necessity for clients to stay on top of regulatory change and margin pressures, emphasising the need to leverage solutions to up their own responsiveness.

Mike Powell, chief executive of Rapid Addition tells The TRADE: “We view this partnership as a genuinely strategic initiative. One of the key market trends we are seeing is a widespread review of legacy trading platforms with a desire by firms to shift to a more agile, orchestrated approach, combining the best of third-party tech with in-house applications.

“Our collaboration with Adaptive aims to seamlessly bring together our respective strengths in supporting trading workflow, while enabling easy integration to our customers’ broader trading system and technology choices.”

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Initially dubbed SBX (Salomon Brothers Exchange), the protocol was first used in anger during 1993. Recognising its potential value to the industry, Salomon and Fidelity looked to extend the community, inviting Goldman Sachs and Putnam to join the initiative. 

At the first meeting someone was smart enough to point out that Salomon’s branding might prove an obstacle to adoption by other broker-dealers. The name was swiftly changed to the Financial Information Exchange Protocol, or FIX, as it’s more commonly known.

In 1995 the first public version of the specification, written by Robert Lamoureux and Chris Morstatt, was released as FIX.2.7. It included the session layer and application messages covering the original execution reporting and IOI distribution, but also added messages to support orders, order modification and cancellation, basic list functionality, and a rudimentary exchange of allocation information. 

The spec was 50-pages long, but just six of those pages addressed the business use of the 17 application messages. It offered a mere 103 fields and only supported equities. Unwittingly creating challenges that would later pose problems, this early version used some of the message types for multiple purposes.

In contrast, the 2020 spec is so large that the FIX technical committee has split it into multiple volumes and introduced a machine-readable format, FIX Orchestra. The current spec contains 168 messages and 7,868 fields, covering all asset classes. It also supports a far richer set of functionality and electronic trading workflow. 

This partly reflects how sophisticated and pervasive electronic trading has become since those pioneering days, but also how FIX has evolved into a compelling industry standard for enabling electronic message exchange.

Following the proof-of-concept between Salomon and Fidelity, FIX started handling the submission order, order modifications and cancels, and allocations electronically. Adoption grew as electronic trading became more widespread, which, by 1998, had become firmly established. By then, many of the orders passing through the electronic trading desk at Salomon’s were not touched by sales traders. The industry was inexorably heading towards a world where trader intervention would be on an exception management basis only.

Natural evolution 

FIX has helped to accelerate changes in market structure. Rapidly gaining traction as the industry moved away from a screen and phone-based environment, the increasing prevalence of FIX made it an obvious choice as the messaging protocol for new trading venues. 

The sanctioning of electronic communication networks (ECNs) in 1998 and subsequent US market decimalisation in 2001 accelerated the spread of electronic trading and use of algorithms, as did further liquidity fragmentation resulting from Reg NMS and MiFID I in the US and Europe. 

While the established stock exchanges had grown up in a non-competitive environment with little incentive to collaborate over common standards, the plethora of new alternative trading venues, such as ECNs and multilateral trading facilities (MTFs), looked to minimise obstacles to growth, often adopting FIX as their primary connectivity solution to lower the effort of onboarding brokers.

With FIX adoption resulting in efficiency gains within equity trading, broadening to other asset classes was a natural evolution. Today, FIX is the dominant standard in equities and widely used in fixed income, derivatives, and forex. It has become the de facto messaging standard for pre-trade and trade communication, supporting order workflow, market data and price dissemination, and increasingly post-trade workflow as the industry strives for greater automation.

FIX has undoubtedly delivered significant efficiency to the industry over the years. But, looking forward, what more can be done to maintain its relevance and generate value? 

Next phase 

Electronic trading has transformed capital markets for the better, but increased electronification along with changes to market structure and regulatory oversight have drastically compressed commissions. 

Regulation has also added significant cost overhead, as has connecting to ever more fragmenting liquidity. The result is a sell-side industry that operates on increasingly thin margins and a consolidating broker community that is not necessarily healthy for the wider market. Standards should champion increased efficiency and drive down costs – with the global COVID-19 pandemic suggesting turbulent times ahead, the need to reduce operating costs and protect margins is more acute than ever.

But, despite the ubiquitous nature of electronic counterparty connectivity and order flow, there is still considerable friction in the system. Models for new trading processes are not well documented, leading to protracted alignment processes. Onboarding and conformance testing are time consuming and still require significant manual intervention. 

The industry needs to complete the journey to standardisation, enabling far greater levels of automation and cost efficiency, and extending the model to include the binary, often proprietary, protocols favoured by high-frequency trading (HFT) firms and their preferred venues. 

Currently, the FIX Trading Community Global Technical Committee is looking to address this through its Orchestra initiative, with the aim of creating a standard for machine-readable rules of engagement between counterparties. We believe tools such as Orchestra can only help this, and I am a major advocate of removing cost and complexity from electronic trading workflow. 

Greater automation and higher levels of interoperability should be the next phase of evolution for FIX, along with the development of tools that put more control in the hands of the end-client, with brokers growing increasingly comfortable ceding tasks to the buy-side. This can drive further cost efficiencies while also helping position brokers as a genuine partner in helping clients achieve their execution objectives.

FIX has come a long way in achieving its original vision of making trading more efficient. It has succeeded beyond the wildest imagination of those of us that were involved in the initial efforts to get the idea off the ground. I think we can see a clear path ahead for what still needs to be achieved. 

Ultimately, the nirvana is a frictionless world of electronic trading where connectivity engineers are only involved on an exception management basis, allowing firms to redeploy valuable resources elsewhere. In many ways this will mirror the role of the sales traders, once the focal point for client orders, but today only involved in the largest trades or when something goes wrong.

The post The long journey to frictionless electronic trading appeared first on The TRADE.

Known as RA Platform 3.0, the electronic messaging protocol is asset-class agnostic and supports order-driven and quote-driven markets. Its modular framework also allows users to define and implement their own rules for risk, smart order routing and other trading processes.

Combining the firm’s FIX engine for low-latency performance with the ability to also deploy proprietary FPGA technology, Rapid Addition said that the new platform was engineered to help both buy- and sell-side clients attain a multi-asset electronic infrastructure through a single platform.

“Platform modernisation is on everyone’s agenda as electronification spreads to all asset classes. Firms struggle with the trade-offs between cost, time to market, and competitive differentiation when deciding whether to buy or build,” said Mike Powell, CEO of Rapid Addition. “Our aim is to provide the industry with a scalable foundation technology that takes care of common requirements, alongside a flexible framework that helps firms tailor services to meet the specific needs of their target clients.”

RA Platform 3.0 can also be implemented either on-premise, in the cloud, or across hybrid environments, which the firm said can help firms manage costs of ownership as well as increase flexibility for users to adapt as technology strategies evolve.  

Rapid Addition added that the new system was designed in collaboration with major financial institutions looking to provide a high-performance core electronic messaging platform. In December, US investment bank Citi moved to integrate two systems from Rapid Addition to support its growth in electronic currency trading.

The post Rapid Addition launches next gen messaging platform for electronic trading appeared first on The TRADE.

The partnership saw Citi deploy Rapid Addition’s FIX engine for low-latency trading, and Hub system for client onboarding, within its pricing technology for spot FX transactions. Clients can connect to the platforms in colocations in London, Tokyo, New York and Singapore.

Electronic trading now represents 80% of global client FX trading volume at Citi, and the bank’s global head of FX e-trading and algorithmic execution, Mark Meredith, said it has become vitally important that the bank is competitive in API trading, with factors such as latency and stability key for the institution.

“Rapid Addition’s technology has enabled this and helped us meet our primary goal of growing our relevance in this space,” Meredith added. “It has also given us secondary benefits such as reducing server footprint by some 70% and ensuring we meet regulatory obligations with regard to scalability. More importantly, it allows us to easily deploy our unique value proposition to clients, whether that be our price construction engine, execution algorithms, or liquidity calibration tools.”

Citi added that demand for price transparency and automated workflow that clients see in trading other asset classes has led to increased levels of electronic trading in FX. Although fragmentation in liquidity is driving up the costs and complexity of connecting to markets, leading to clients seeking larger banks for access to liquidity coverage. 

“As market fragmentation, best execution and trade automation continue to become common themes across all major asset classes, our customers are increasingly leveraging our scalable enterprise technology to address business challenges across their trading workflow,” Mike Powell, CEO of Rapid Addition, commented.

In March, Citi confirmed plans to launch its FX pricing and trading engine in Singapore as part of a scheme with the Monetary Authority in Singapore to boost development of the region as a key liquidity hub in Asia. The platform includes proprietary pricing and a hedging algorithm, and initially offered trading in 23 spot currencies as well as two precious metals.

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Rapid Addition said in a statement that Mike Powell will take on the role in London, and Kevin Houstoun will remain executive chairman at the firm, but will hand operational responsibilities to Powell. As chief executive, Powell will lead Rapid Addition’s growth plans as it looks to build out its enterprise solutions for electronic trading, FIX/FAST and FPGA technologies.

“Having secured several new tier-1 customers over the last two years, we continue to invest in both our technology and people,” Houstoun said on Powell’s appointment. “We see significant opportunity in helping customers evolve their trading infrastructure as regulation continues to push the industry towards an increasingly electronic and transparent world. I look forward to working with Mike to build on Rapid Addition’s position as a strategic technology partner to the electronic trading community.”

Powell is a former veteran of Thomson Reuters, having held various senior roles during the 17 years he spent working there. He was most recently managing director for global enterprise business responsible for the data feed and platform business under the Elektron brand.

More recently, Powell founded a consultancy and advisory firm focused on the FinTech, data and analytics space, and has worked with several clients on strategy, sales and business development. He also spent two years as chief revenue officer at AI and machine learning trading technology firm Simudyne.

“Given the ongoing trend of capital market automation across all asset classes, particularly in the domain of electronic trading, it is an exciting time to be joining Rapid Addition. Repeated customer success has proven the value of our technology in creating a future proof platform for electronic trading and customer and venue connectivity,” Powell commented.

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