The Financial Information eXchange (FIX) is a vendor-neutral electronic communications protocol designed for the international real-time exchange of securities transaction information. Used by the FIX community, which includes nearly 300 member firms such as leading investment banks, the FIX protocol has become the industry standard for pre-trade, trade, and post-trade communication. It is also integral to U.S. regulatory reporting and is compatible with nearly all commonly used network technologies.
Key Takeaways
- The Financial Information eXchange (FIX) is a data protocol for transferring price and trade information among investment banks and broker-dealers.
- The FIX Trading Community is a non-profit entity created to ensure the FIX protocol remains in the public domain.
- Often adopted for front-office messaging, the FIX protocol standardizes communication practices among financial institutions.
Understanding the Financial Information eXchange (FIX)
The communications facilitated by the FIX protocol encompass various channels, including texting and email, securities trade allocations, order submissions and changes, news dissemination, trade advertising, and execution reporting. Primarily used for business-to-business (B2B) interactions, FIX is engineered to enhance business communication efficiency and streamline transaction flows.
By minimizing redundancy and reducing the time spent on phone calls, written messages, transactions, and documentation, the FIX generates tangible benefits for funds, investment managers, and investment banking firms. It enables the accurate and timely transfer of financial information regarding securities trades across and within security exchange houses.
Introduced in 1992 to streamline equity trading between Salomon Brothers and Fidelity Investments, the FIX protocol replaced a cumbersome system primarily conducted over telephone lines. The earlier system often suffered from inefficiency, with critical indications of interest getting lost or misrouted. The FIX protocol has subsequently evolved to become the primary electronic standard for pre-trade, trade, and post-trade communication in equity markets worldwide. Similar to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in back-office messaging, FIX sets the standard for front-office financial communication.
Financial Information eXchange (FIX) Users
The FIX is favored by both the buy-side (institutions) and the sell-side (brokers/dealers) of the financial markets. Diverse users such as mutual funds, investment banks, brokers, stock and futures exchanges, and other electronic communication networks (ECNs) rely on this robust protocol. Originally designed for equity transactions, FIX protocols have also been adapted to handle bond, foreign exchange, and derivatives transactions.
The member firms of the FIX Trading Community maintain and develop the FIX messaging standard, including numerous leading financial institutions globally. Their concerted effort ensures that the protocol continues to meet emerging trading requirements and promotes its global adoption.
One of FIX’s most significant attributes is its non-proprietary, free, and open standard, continuously developed and refined by its member firms to keep pace with evolving market needs.
What’s Next for the FIX?
The FIX protocol adapts to changes in the industry and advancing technology. Recently, discussions among its members have addressed current issues such as cybersecurity, digital currencies, blockchain, execution transparency, and performance improvements.
For firms interested in implementing the FIX protocol, the FIX implementation guide is available for download from the FIX Trading Community website.
Related Terms: securities, investment banks, execution reporting, business-to-business, investment managers, front-office messaging.
References
- FIX. “What is FIX Trading Community?”
- FIX. “About”.
