What exactly is the Financial Information Exchange, or FIX for short?
Financial Information Exchange (FIX) is a vendor-neutral real-time international securities transaction messaging protocol. The FIX community uses the protocol, including almost 300 organizations and central investment banks.
The U.S. regulatory reporting and pre-trade, trade, and post-trade communication now use the FIX as the standard. It works with most network technologies. FIX Protocol, Ltd. is responsible for owning and maintaining the system. The company was established to accomplish that and maintain system transparency.
Solid Understanding of the Financial Information eXchange (FIX)
FIX communications include SMS, email, securities trading allocations, news, order submissions, modifications, advertising, and execution reports. Typically utilized in B2B engagements, it enhances commercial communication and transactions.
The FIX reduces redundancy and time spent on phone calls, written messages, transactions, and documentation. The advantages are clear for funds, investment managers, and investment banks. Security exchange houses utilize FIX systems to exchange reliable and timely financial information about securities deals.
The FIX protocol, introduced in 1992 for equities trading between Salomon Brothers and Fidelity Investments, streamlined transactions and record-keeping, replacing a phone-based system. The old method sometimes resulted in missed “on hold” or misdirected interest signs.
After being the de facto standard electronic protocol for pre-trade, trade, and post-trade communication in equities markets, the FIX is also widely used in other markets.
SWIFT is the standard for back-office communications, while FIX is the standard for front-office messaging.
User of Financial Information Exchange
In the financial markets, buy-side institutions and sell-side brokers and dealers frequently use FIX. Clients include mutual funds, investment banks, brokers, stock and futures exchanges, and other electronic communication networks. Although it can handle bond, foreign currency, and derivatives transactions, it mainly handles equity transactions.
FIX Trading Community businesses maintain and advance the FIX communications standard. Members of the community include top financial firms worldwide. These member businesses keep the standard updated to suit new trade needs.
Their actions boost global FIX adoption. Business members of the FIX protocol regularly improve it because it is non-proprietary, accessible, and open.
What’s Next for the Fix?
The FIX evolves with industry and technology. Members have been considering cybersecurity, digital currencies, blockchain, execution transparency, and performance improvements in recent years.
- The Financial Information Exchange (FIX) transfers pricing and transaction data between investment banks and broker-dealers.
- To keep FIX public, the non-profit FIX Trading Community was founded.
- FIX is a front-office communications standard.