Industry Looks to Formalize FIX Ecosystem
The English prose specifications published by the FIX Trading Community for its engine are being translated into mathematically precise language in order to encourage the industry to formalize the rules and algorithms that run increasingly complex financial markets.
The FIX family of standards is run by the non-profit FIX Trading Community, whose members represent all types of participants in financial markets, to standardize trade communications and reduce costs and inefficiency. In order to use FIX, firms can download the implementation guide which provides recommended best practices and the technical specifications which are both written in prose English.
Aesthetic Integration, the startup that won the UBS Future of Finance challenge in 2015, has converted the English prose specification published by the FIX Community into mathematically precise language which can be tested with formal verification, a technique used to develop software in safety critical industries such as air traffic control systems. Formal verification employs automated mathematical techniques to ensure system specifications are consistent and designed correctly, and can then be applied to test whether a live system is behaving in accordance with its specification.
Aesthetic Integration said on a blog: “We hope this project will be the beginning of an industry-wide effort to mathematically formalize the rules and algorithms that run the financial markets. This formalization will significantly benefit the industry, cutting down time and costs for connecting (and ensuring regulatory compliance of) the numerous systems relying on this protocol.”
The firm was co-founded by Denis Ignatovich, previously head of the central risk trading at Deutsche Bank in London, and Grant Passmore, a mathematician specialising in formal verification. The model started by Aesthetic Integration, consists of an executable formalization of an administrative-level FIX engine, a sample application-level model and a set of verified precise statements about the engine’s behaviour with further development being open-sourced on GitHub, the software development platform.
“A fundamental issue with financial trading systems is that they may be in a virtually infinite number of possible states. That is, there are infinitely many (or infeasibly many) possible sequences of incoming messages which they may have to process,” added Aesthetic Integration. “We’ve built on recent advances in formal verification to develop powerful new forms of model-based testing.”
In addition to being able to use formal verification, Aesthetic Integration’s model allows all users to have a precise, unambiguous foundation for describing, evaluating and improving the definitions and mechanics of the FIX protocol; to automatically generate high-coverage test suites; to use the verified model to generate source code in other languages and as the basis of simulation environments.
The FIX Trading Community has also formed a working group to generate machine readable rules for FIX specifications, known as FIX Orchestra.
Jim Northey, FIX Global Technical Committee co-chair and senior vice president, strategy and research at Itiviti Group AB, said in an email to Markets Media that the committee and the FIX Orchestra Working Group, managed byFIX technical architect Don Mendelson, believe that Orchestra has the potential to re-engineer the entire FIX eco-system.
“Orchestra has the potential to greatly lower costs, improve reliability, and take FIX standardization to a higher level by providing a machine readable and actionable specification that, in its fullest potential, can be used to dynamically adjust behaviors on service end points, such as an asset manager’s order management system and a broker dealer’s execution management system,” said Northey. “Our full focus with Orchestra is improving operational efficiency and reducing the time to trading.”
All FIX Technical Specifications are developed using a process of a series of release candidates, eventually leading to a draft standard, which needs adoption, interoperability and compliance to be proven before it becomes an authorized FIX standard. The first Orchestra release candidate was made available a few months ago and the second should be available within the next two months.
Northey said Orchestra could extend the life of the FIX standard by addressing the issue of large differences in the way the standards are implemented across the industry.
“Adopters that make the investment in FIX Orchestra need it to support all of the various protocols, for order routing, trading, clearing, settlement, market data, not just the traditional FIX messaging,” added Northey. “If vendors and the FIX community fully embrace Orchestra, we could see as a side effect that the adoption of FIX would continue to increase. FIX adoption is still growing globally, Orchestra could help increase the growth rate.”
A firm's data might be more valuable than its core business offering.
New market structure will allow personalised trading experiences.
FX market has seen regulatory reform, new technology and structural change.
SETL and four asset managers are launching IZNES.
Firms' ability to mine and utilize data will be mission-critical.