FIX and Trading Transparency: An Overview
The objective in today’s time and age is using the FIX solution to focus on trading and maintaining transparency in trade related work. The processes involved in buying as well as selling securities involve both the explicit and the implicit costs. The explicit costs are mainly the taxes, fees and commissions. The implicit costs mostly vary and are based on the effects the trading activities have on the security systems. Focusing on transparency and the processes involved in obtaining information needto be analyzed properly to understand the execution cost.
Understanding the Impact of the Market Movement – Understanding the market movement is important because that is the only way to know more about the routing decisions. The buying side needs to know and understand the patterns of the selected algorithms. This actually helps in predicting the performance and understanding the market impact. Adjusting the trade orders and the strategies in real time becomes possible and easy during such times. The market movement patterns need to be clearly understood to have a fair idea about how the work will get affected by it.
FIX Message Structure – Trade transparency is important and that is something everybody wants. However, in order to achieve such high levels of transparency, a large volume of data is required. The present FIX specifications do not include a huge amount of tags that will help in successfully covering the information that is needed. Just the tags are not enough because along with that you would also need the right information on volatility, spread, print size and market cap. With the help of FIX order routing delivering data to maintain trade transparency is possible.
Trading Transparency– It is important to conduct a proper evaluation of the selling side algorithm in routing an order. The buying side also needs proper routing information and that sometimes becomes a huge problem that is often difficult to manage. Managing data for people belonging to the selling side is a huge problem because the volume of data is huge. For example, a single order goes on to have 50 to 60 rows of routing and that is indeed a challenge to handle. Firms trying to manage trade patterns can get the highest return on investment even before investing in getting accurate information. Unfortunately, the buying side lacks the processing power and the technical expertise required to understand the entire thing and use the existing information in spite of the availability that exists.
Proper analysis and understanding of the processes help in improving transparency in the trading activities. Professional brokers are approached in order to protect the proprietary information because there are hacking risks involved. FIX is considered to be the best solution in order to improve transparency because that makes the flow of work smooth and efficient.