FPL updates best practice execution venue reporting guidelines

First Published 29th May 2012

Enhancements to FIX Protocol's best practices guideline provide greater insight for European equity markets traders

 Jim Kaye, Co-Chair, FPL EMEA Business Practices Subcommittee

Jim Kaye, Co-Chair, FPL EMEA Business Practices Subcommittee

"Greater knowledge and understanding can only serve us all well, particularly in these times of lean liquidity."

FIX Protocol Ltd (FPL), the non-profit, industry standards organisation for the electronic trading community, has published updated recommended best practices for execution venue reporting. This set of guidelines has been designed to provide greater transparency for buy-side clients about where and how their orders are executed by their brokers.

The guidelines were originally produced in February 2011 by FPL's Americas Buy-side Working Group to address the need for more consistency and greater clarity in execution reporting. Following requests from their buy-side clients, the guidelines are now being successfully implemented by many sell-side firms. In response to feedback from a number of buy-side and sell-side firms, these guidelines have now been revised and extended. This includes specific enhancements intended to provide greater insight for firms trading on European equity markets.

The guidelines focus on requesting sell side firms to 'tag' their trades with specific details using FIX, which is the messaging language used by the global trading community. These 'tags' are designed to provide the following information in a consistent format:

  • On which venue or exchange the order was executed
  • To uniquely identify markets, including market segments where it is appropriate to distinguish between lit and dark order books
  • Whether the order was executed as a result of having traded passively by posting liquidity, or aggressively by taking liquidity
  • Whether the trades were executed on an agency or principal basis

Commenting on the guidelines, Guy Sears, Director at the Investment Management Association said, "We welcome all industry initiatives designed to provide the buy side with greater transparency over how and where their orders were executed. As the equity markets become ever more complex, algorithmic trading strategies are increasingly used by brokers in the quest for best execution. Buy-side firms need to understand how their liquidity interacts in the markets. I hope that firms which adopt these best practices will find them of real value."

Commenting on the enhanced guidelines, Brian Lees, Co-Chair of the FPL Buy-side Execution Venue Working Group and Manager of Application Development at The Capital Group Companies stated, "The buy-side members of FPL have expressed a clear appetite for greater clarity and consistency in reporting from their brokers. Working with members in different markets globally we have been able to update the guidelines so they deliver even greater insight to the buy-side community."

Jim Kaye, Co-Chair of the FPL EMEA Business Practices Subcommittee, and Director, Product Development, European Execution Services, BofA Merrill Lynch said, "As a member of FPL, BofA Merrill Lynch, has been actively involved in developing the guidelines so they can be used more effectively for trading in markets such as Europe, and we feel the increased insight they will present to the buy-side will offer tremendous benefit. Not only will this enable firms like ours to have more strategic and compelling discussion about trading strategies with our clients, but also help us adapt our algorithms and trading strategies accordingly. Greater knowledge and understanding can only serve us all well, particularly in these times of lean liquidity."

To view the guidelines please visit: www.fixprotocol.org/documents/6685/FPLBuy-sideExecVenue_May2012_1.pdf

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