Taikitsadaporn Fills The Gap for Fixed Income

NewsFIX editor Cate Long asked Lisa Taikitsadaporn of Brook Path Partners to share her experiences and perspective on the extension of FIX to fixed-income trading. | December 2003 |

Q: How has your involvement with FIX Protocol developed?

A: I first became involved with FIX as a user in 1994 when I was at Thomson Financial, working on its equity order routing network product, TradeRoute. I left Thomson in 2000 around the time that the first draft of FIX 4.3 was just being put out for public comment. Via email, I provided detailed comments on all of the drafts through the FIX 4.3 release process to the Technical Committee (the predecessor to the Global Technical Committee).

Towards the fall of 2000 I responded to the call for participation on the FIX ISO XML Working Group. During that same timeframe I had the opportunity to meet Dean Kauffman through my involvement on a project implementing FIX for fixed income. Almost immediately, he asked me to join his fixed income working group that was a result of the BMA/FPL joint initiative.

It was over that short period of time that I went from being a peripheral contributor to an active contributor on the Technical Committee and various working groups. In a nutshell, FIX has been my niche for 10 years and it will continue to be a big part of my work.

Q: You helped write the extension of FIX to fixed income using the “gap analysis” from the Bond Market Association. Do you feel that FIX mirrors “best practices” for fixed income trading or were compromises made to accommodate peculiarities of the Protocol?

A: Actually I was a primary author of the “gap analysis” document, together with Dean Kauffman. When Dean asked me to participate in his fixed income working group the “gap analysis” document did not exist. I was provided with the Plain English documents that were available at the time and started to do my own analysis, based on the goals of the working group. That analysis work became the foundation of the “gap analysis” document. Dean had also done some of his own analysis work, so we combined our work to create a single “master” document.

The Plain English documents definitely helped the gap-analysis process. Without those documents I do not believe that FIX 4.4 would be providing the level of support for fixed income securities processing that it does today. Dean and I also had the benefit of actually being in the process of implementing FIX for fixed income trading between two counterparties as we were trying to nail down the contents of the gap analysis document.

FIX 4.3 itself provided us with a well developed foundation on which to work. Much of the transactional dialog was already there in FIX 4.3, especially for orders/execution and allocations. What we needed to beef up was the negotiation dialog. There were some message types that we had to “reframe” in terms of how they were to be used in the fixed income space as opposed to the equity space.

Q: In your professional work of helping firms implement FIX into their trading and processing systems, what are the largest hurdles you have encountered?

A: In nearly three years of consulting on FIX implementations since co-founding Brook Path Partners, Inc., I have not come across hurdles that cannot be overcome. Firms that have decided to embrace FIX engage in the initiative knowing what is involved. It takes commitment, and changes will need to occur that affect trading systems and workflow processes, as well as also requiring the traders to modify their behavior. I have been fortunate so far to be involved in projects where I didn’t have to “sell” the merits of electronic trading and FIX because by the time I’m brought in the project has already been “sold” and approved.

Q: What benefits have you seen develop for firms that implement FIX?

A: The main benefit I’ve seen is an increase in the traders’ efficiency in doing their jobs. They are now able to focus more on looking for trading opportunities than on doing clerical work. This is true for both buy-side and sell-side traders. By removing the need to re-enter trade data, FIX is a tool that aids any firm’s STP initiative. The front office automation provided by FIX reduces errors in the trade information needed for middle and back office operations.

Q: Does Version 4.4 adequately support the entire trade cycle through allocations and confirmations or do you see additional work being done to support the backend of the trade cycle?

A: From the trade cycle of an institution through to the sell-side flow, 4.4 facilitates the communication of the data needed for the entire transactional dialog including allocations and confirmations. The entire volume on post trade messaging went through a major revision as a result of the “gap analysis” and the work output from the Allocations Working Group led by Jim Kaye of Goldman Sachs in London. However, Dean Kauffman and I made sure that fixed income’s requirements were also met by the changes proposed by the Allocations Working Group.

Q: In firms that are implementing FIX across multi-asset classes, are they generally building fixed income capability on top of equity systems or new and separate FIX systems?

A: What I’ve seen so far is that the efforts are separate across asset classes, although some firms are trying to coordinate the FIX infrastructure aspects. Many middle and back office systems are already shared across the different asset classes that a firm may trade. On the front office side, the trading systems supporting the equity desk and the fixed income desk are still separate. However, the firms that are progressive will eventually build a common FIX infrastructure and provide a messaging component as a common service to all of their different trading desks.

Q: What resources can be shared across asset classes in a firm easily, e.g., the FIX engine?

A: The FIX engine, the network to communicate with counterparties external to the firm, and, as I mentioned above, a common messaging component can be shared internally. These are systems and infrastructure resources that can be shared within a firm. In terms of human resources, I foresee firms with a large FIX infrastructure also forming a group of people who will support this infrastructure across the firm – regardless of the asset types being traded. From a support perspective it is all the same no matter what asset type is being traded.

Q: You also helped write the new FIX Implementation Guide – any recommendations for our readers on its use?

A: The Implementation Guide is a starting point. It is a high level document aimed at key decision makers to educate them as to what is involved in taking on such an initiative. I think it is best to look at it as your high level project checklist. The nuts and bolts of implementing FIX are going to be different for each firm, but the key chapters of the guide can easily be the major line items in an implementation project plan.

Q: What is your background and what does your firm do?

A: As mentioned earlier, I have been involved with FIX implementations for 10 years. The majority of my experience has been in equity. For me the transition to implementing FIX in the fixed income space was a matter of learning and understanding the business of fixed income. Without a solid understanding of the business processes being supported, it is difficult to fully exploit the benefits of any technology. FIX is no exception.

My background, educationally, was in computer science and MIS. One of my first jobs out of college was as a software quality assurance engineer for a software firm. I later earned a Masters of Science degree in finance. While with Thomson my role required that I work directly with both clients’ technical and business staff. So I am a techie who later transitioned into this “business technologist” role.

Brook Path Partners, Inc., is a financial technology consulting firm. We are not a systems integration firm nor do we sell any software products. Our guiding principle is to be vendor and technology neutral so that we can deliver unbiased advice to our clients. The types of services we provide include business analysis, strategic planning, project management, high level architectural design, vendor evaluation, test strategy and planning, and education and training around the implementation of technology supporting the entire trade lifecycle. FIX-related projects we’ve been involved in include implementation for fixed income, retooling of internal infrastructure, implementation training, and giving general advice and guidance to firms on their FIX implementations. Our work has covered buy-side, sell-side, vendors, and ECNs, in both the fixed income and equity spaces. A major objective of Brook Path Partners is the transfer of knowledge to our clients’ staff during an engagement. We feel that firms do best when their staff members are given the opportunity to learn new things that are directly related to their jobs. Our mode of operation is also different from other consulting firms in that our principals’ time is shared across multiple projects for different clients at once. This requires our clients to dedicate their own people to work with us. It is through this arrangement that the knowledge is transferred to the firm’s staff. It becomes a win-win situation for all involved.

Lisa Taikitsadaporn is co-founder of Brook Path Partners.  She has worked with the FIX Protocol for over ten years, first as a user at Thomson Financial and then as a consultant.