Fixed Income in a Stock Exchange Environment

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Imported from previous forum

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[ original email was from Andrei Goldchleger - agoldchleger@bmf.com.br ]
Hi there,

We are currently evaluating the adoption of FIX (4.4) for fixed income products. I read the fix documentation, including the application notes, and I see that negotiation is typically done via RFQ/IOIs. Is this kind of message flow targeted to OTC markets? If I negotiate bonds in a OMS system, can/should I use other kinds of message flows, such as New Order Single? What are the advantages/disadvantages of each solution?

3

The Fixed Income flows can take on a number of different workflows including starting with a negotiation, or merely starting with an order while the negotiation is done outside of FIX. FIX is flexible enough to support mutliple types of workflow models as long as the usage of the FIX messages does not violate the intended use or definition of that message. The flows documented were intended for the dialog between an investment manager and the broker/dealer, and between the investment manager and an alternative trading platform (ATS) such as TradeWeb and MarketAxess. At the time that the specification was enhanced for Fixed Income we were not aware of an exchange traded model for fixed income, thus the workflow for that model was not described.

Hi there,

We are currently evaluating the adoption of FIX (4.4) for fixed income
products. I read the fix documentation, including the application notes,
and I see that negotiation is typically done via RFQ/IOIs. Is this kind
of message flow targeted to OTC markets? If I negotiate bonds in a OMS
system, can/should I use other kinds of message flows, such as New Order
Single? What are the advantages/disadvantages of each solution?

4

I have seen several fixed income implementations based on an exchange model with NewOrderSingle being used.

Several were exchanges which supported multiple asset classes (and therefore wanted the same interface for all). The others were pure
fixed income implementations where the sell-side acted like an
exchange; the customer would send an order - sometimes as fill or kill -which the sell-side would then either execute or not.

I think that it is quite common in Europe for retail fixed income.

George.

The Fixed Income flows can take on a number of different workflows
including starting with a negotiation, or merely starting with an order
while the negotiation is done outside of FIX. FIX is flexible enough to
support mutliple types of workflow models as long as the usage of the
FIX messages does not violate the intended use or definition of that
message. The flows documented were intended for the dialog between an
investment manager and the broker/dealer, and between the investment
manager and an alternative trading platform (ATS) such as TradeWeb and
MarketAxess. At the time that the specification was enhanced for Fixed
Income we were not aware of an exchange traded model for fixed income,
thus the workflow for that model was not described.

Hi there,

We are currently evaluating the adoption of FIX (4.4) for fixed income
products. I read the fix documentation, including the application
notes, and I see that negotiation is typically done via RFQ/IOIs. Is
this kind of message flow targeted to OTC markets? If I negotiate
bonds in a OMS system, can/should I use other kinds of message flows,
such as New Order Single? What are the advantages/disadvantages of
each solution?