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What’s the future for order routing?

Bryan Labelle
Bryan Labelle
Director, Trading Capabilities, Refinitiv

FIX networks have evolved to consolidate order routing systems. What benefits will this increased functionality bring to your trading ecosystem?

  1. As times change and technology evolves, traders need an order routing network that can offer more value than it did in the past.
  2. While order routing might be considered mundane, the ability to correctly and efficiently route an order is key for achieving best execution.
  3. The new FIX network should not only help connect your trading ecosystem; it should be your trading ecosystem.

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Order routing may be one of the more mundane aspects of the trading business, but it is your connection between the customer and an exchange. The ability to correctly and efficiently route an order is important in achieving best execution with minimal market impact.

It’s no secret that the vast majority of exchanges and brokers use the FIX protocol for order routing. It has become the de facto standard in broker-exchange connectivity. The challenge today is managing those FIX messages.

With multiple trading systems, new asset classes and algorithmic trading across global markets, the task is not as simple as it once was. But what if there were a way to consolidate your order routing network?

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The origins of the FIX network

To put a spin on a popular quote from Maya Angelou — you can’t really understand where you are going until you understand where you have been.

A consolidated system needs more functionality than the traditional FIX network, which was founded to perform the simple task of moving a FIX message from point A to point B. It was a commoditized product that only offered basic FIX version validation.

Times have changed, and technology has evolved.

Traders need the network to offer more value than a mere transport mechanism is capable of. In an increasingly disrupted world, FIX networks are expected to also take on much of the front- and middle-office functionality.

The FIX network of today

The current (and future) FIX network is bigger and better. But that doesn’t equate to more.

Networks are aiming to reduce the amount of software they have to buy. At the same time, they want a system with built-in functionality and tighter workflow integration.

This all-in-one platform has simplified connectivity to provide faster, more comprehensive data normalization, which is key to reducing certification time and manual testing.

It is also crucial for housing front office functionality because the network has a comprehensive view of all the trades, including risk management, internalization and anti-crossing, and rules-based routing and algo wheels.

Autex Trade Route

Refinitiv’s Autex Trade Route (ATR) is one of the world’s largest global FIX-based order routing networks.

With thousands of connections across the trading community, it ensures that your systems and trading partners are synchronized, and that your order metrics and connections are visible on a single platform.

It also has the flexibility to meet current and future needs, and has the economies of scale to offer a managed FIX service.

Watch: The search for liquidity in buy-side trading

Enhanced features

This new FIX network should not only connect your trading ecosystem; it should be your trading ecosystem. It also provides:

  • Analytics: With trades in view, the FIX network is able to perform analytics on data to help you decide what to trade based on liquidity. This insight can be in the form of signals, decision support analytics or standard transaction cost analysis.
  • Monitoring: The cloud FIX network enables you to see your entire trade network activity without having to move across multiple systems. Meanwhile, its blotter functionality helps you to interact with trades.
  • Reporting: With ever-increasing regulatory requirements on buy- and sell-side firms, a FIX network gives additional transparency and capabilities to capture accurate data. Even with emerging regulatory reporting requirements by FINRA and other global organizations, such as the Consolidated Audit Trail (CAT) and 605/606, FIX networks are able to aggregate the data required to generate these mandatory reports.

Future FIX trading

By placing more trading and risk functionality in the FIX network, you provide traders and compliance and risk staff with a consistent trading environment.

The future FIX network will become more integrated with the trading ecosystem and contain the actual trading activities, not just the transport layer. This will help eliminate errors or inaccuracies and save time to focus on core competencies, namely trading with partners and making money.

Everything you do on your trading software and systems will ultimately end up as a FIX message anyway. But with a consolidated FIX network, you get the full picture faster.

Discover and analyze trading opportunities, formulate strategy and generate ideas with Refinitiv Trading

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Refinitiv, or any of its respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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