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February 1, 2011

Buyside Gets More Info Via FIX

By Peter Chapman

Also in this article

  • Buyside Gets More Info Via FIX

The push by the buyside to garner more information from their brokers about their trades is bearing fruit.

Scott Atwell

The buyside working group of FIX Protocol Limited has convinced a group of about two dozen brokers to increase and standardize the information they deliver to their institutional customers as part of their trade reports.

FPL has written a draft paper that outlines the fund managers' needs, specifically the identities of the venues to which their orders are sent. The group is circulating that paper among other brokers and money managers.

"The buyside wants to know what is going on as it is going on," said Scott Atwell, manager of FIX trading and connectivity for American Century Investments and co-chair of the FPL global steering committee. "This is valuable information. It's important that we know where our flow is being executed."

The FPL initiative follows a year of grumbling by the buyside over the paucity of information they receive about their brokers' order-handling practices. As the stock market has fragmented into dozens of dark and lit trading venues, the buyside has requested more details about which venues receive their orders.

The new information will not only make clear for buyside traders where their orders are being filled, but also if they are the optimum venues. By comparing their fills against the relevant market data, the traders will know if their orders were sent to the right place at the right time.

The information is also expected to help money managers make judgments about whether or not their brokers' routing decisions were made to benefit the broker or the client. Rebates received from maker-taker venues and the use of proprietary dark pools are flash points for some on the buyside.

FPL is the pan-industry group of traders and technologists charged with managing and promoting the FIX messaging standard. Members of the buyside working group include such large shops as American Century, Wellington Management, The Capital Group, Franklin Templeton and Fidelity Management & Research.

The initiative is not a major reworking or expansion of the FIX protocol, the messaging language of trading. The group is merely asking the sellside to fill in three fields with their post-trade reports. Two of the fields already exist. One more has been created.

"It is not a change to the specification," Atwell said. "Rather, it is a best practices document."

First and foremost, FPL is requesting that brokers fill in the "Venue" field, which denotes where the execution took place. The data will include the names of the exchanges as well as the dark pools--wherever the order was filled.

The FPL is not, however, adding a field or fields to denote the names of the venues the order passed through, but did not execute at. Many on the buyside are clamoring for that information, as well.