Exclusive Online Only ContentEuropean Exchanges and Clearinghouses Back Two Messaging Protocols
July 2, 2009
European trading venues and clearinghouses represented by the Trading2 Clearing Working Group today recommended the use of messages that adhere either to the Financial Information eXchange protocol or the International Standardization Organization 15022 standard for their exchanging of information electronically.
The recommendation on message syntaxes was part of a broader Trade2Clear document outlining communication standards between markets. The standards also include operational guidelines and the details to be included in the trade message, such as basic information on the transaction, the counterparties to the trade and where it should be cleared and settled.
FIX and ISO-compliant messages already are two of the most commonly used in the securities industry, but the organizations advocating them have often been at odds over just how far their protocols should extend into the other’s reach. Swift, a global provider of financial messaging services, is the chief proponent of ISO-compliant messages which are favored among clearinghouses and depositories in the post-trade processing arena. Trade2Clear’s decision to include the FIX protocol as a message standard appears to be accommodating the needs of alternative trading platforms represented in its group.
The Trade2Clear working group is comprised of representatives from alternative trading platforms Burgundy, Chi-X Europe, Equiduct, London Stock Exchange, Nasdaq OMX Europe and Turquoise.
Also in the group are representatives from clearinghouses EMCF, EuroCCP, LCH.Clearnet, and SIX x-clear. Italian depository Monte Titoli, owned by the London Stock Exchange, is part of the group providing a routing and netting engine to send messages on net positions to other clearinghouses.
"Significant strides have been made in interoperability this year, and the proposals the Trade2Clear group has developed are aimed at delivering and enhancing the benefits that interoperability will bring to end users,” said Adrian Farnham, COO of Turquoise in a statement issued by Swift today.
Frank Versmessen, senior market manager at Swift, said that members of the Trade2Clear group had been using either proprietary messages or inconsistent adaptations of FIX or ISO formats. “The goal is to reduce the amount of work and time it takes for an exchange to link to multiple clearinghouses,” he said.
Establishing interoperability -- advanced links among market infrastructures – is one of the tenets of a voluntary code of conduct on clearing and settlement established in 2006 by European Union Internal Market Commissioner Charlie McCreevy to reduce the costs of processing cross-border transactions in the European Union.
European exchanges and alternative trading platforms which would have once cleared trades only using clearinghouses in their own markets but must now provide financial firms with the choice of where they want to clear their trade. In 2005, the Giovannini Group, a high-level European group specializing in clearance and settlement issues, assigned Swift the task of creating a common communications interface for market infrastructures. This was to help cut down the costs of post-trade processing of cross-border trades on the continent. Swift endorsed the use of ISO 15022 and the more advanced 20022 messaging standard now under development.
In January 2009, members of the European Central Securities Depositories Association issued a set of which also called for the adoption of message types compliant with the ISO 15022 format. That trade group represents European national depositories as well as two international depositories, Clearstream and Euroclear.
