The FIX Trading Community, the industry association that manages the world’s trading language, is inviting ETF market participants to join a new Working Group to drive automation, standardisation and transparency.
FIX Executive Director Jim Kaye said while the USD $18.8 Trillion ETF market had undergone explosive growth, systemic issues are hampering further growth and development. A core issue is the lack of standard interfaces and workflows between ETF issuers, custodians, administrators and Authorised Participants (APs) who create and redeem ETF shares.
“Authorised Participants are telling us that they’re now turning business away, because having to manage multiple, manual system integrations and workflows creates significant levels of risk and cost,” he said. “Lack of automation in primary markets is also increasing spreads, particularly during volatile periods, and negatively impacting secondary markets.”
The new Working Group will focus on four key areas:
- Developing industry-wide standards for ETF creation and redemption workflows. This will reduce operational risks, improve efficiency, and have positive impacts on ETF liquidity.
- Defining common communication standards around metadata and reference data to support automation and interoperability.
- Designing standard ways to transmit basic static data and reference data, as well as reject messages and NAV information, via FIX fields.
- Addressing post-trade challenges such as fragmented settlement locations, and the implications of T+1 settlement for cross-border ETFs.
Bo Bjurgert, COO of ETPLink, the next generation Exchange Traded Product (ETP) primary market order management platform, said FIX is the natural solution for long-term standardisation. “Everyone uses FIX already, and the Protocol can be updated easily and flexibly to solve these problems,” he said. “Both issuers and APs recognise the need to have the entire chain from creation and redemption to trading and settlement automated via FIX.”
Firms interested in joining the working group can contact FIX via www.fixtrading.org.
The FIX Trading Community is the only independent global community where capital markets firms come together to solve common issues and shape the evolution of capital markets. FIX groups in over 60 countries are working on a range of global issues including digital assets; reference data; carbon trading; AI; algo trading; FICC and ETFs, while country and regional committees work together to manage local regulation and market structure matters.
