Imported from previous forum
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market. But, if you want to change your market, the process is cumbersome. You have to maintain each order separately.
The quote message provides the four fields needed to make a two-sided market, but the execution report doesn’t map very well in response to a quote.
I’d like to gauge if other firms are running into similar challenges implementing market making functionality within FIX.
At least for Fixed Income, Vol 7 seems to describe exactly the situation you are talking about. A tradable Quote and a Quote Response would constitute the 2 sides. And an Execution Report is exacly how the “Quoter” (the party that put out the tradable Quote) would notfy the other party of the execution having been consumated.
Are you looking at a very different situation?
Nikhil
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market. But,
if you want to change your market, the process is cumbersome. You have
to maintain each order separately.The quote message provides the four fields needed to make a two-
sided market, but the execution report doesn’t map very well in
response to a quote.I’d like to gauge if other firms are running into similar challenges
implementing market making functionality within FIX.
[ original email was from Jim Northey - jnorthey@jandj.com ]
As Nikhil indicates a suite of messages was added starting in FIX 4.2 to address entering two sided markets for listed derivatives markets. As of FIX 4.4 there are messages to enter a two sided market, request a market, negotiate a market. We created three quotation models - indicative, tradable, and restricted tradable. All are somewhat documented in the FIX 4.4 documentation. There also is the Mass Quote message that is useful for quote multiple option series for an underlying. Even though the messages originated with derivatives and was then adopted by fixed income there is no reason why the same messages cannot be used across other asset classes.
At least for Fixed Income, Vol 7 seems to describe exactly the situation
you are talking about. A tradable Quote and a Quote Response would
constitute the 2 sides. And an Execution Report is exacly how the
“Quoter” (the party that put out the tradable Quote) would notfy the
other party of the execution having been consumated.Are you looking at a very different situation?
Nikhil
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market. But,
if you want to change your market, the process is cumbersome. You have
to maintain each order separately.The quote message provides the four fields needed to make a two- sided
market, but the execution report doesn’t map very well in response to
a quote.I’d like to gauge if other firms are running into similar challenges
implementing market making functionality within FIX.
Jim, what suite of messages are you talking about in FIX 4.2 as Nikhil mentions the Fixed Income model in FIX 4.4. Unfotunately, the FI model does not work well for market making on an automated market.
Nikhil, the quote message does allow you to enter a two-sided market. But, the Fixed Income model requires the quoter to send the execution report. That is the main problem for applying that model to an automated marketplace.
Imagine an exchange, where market makers send in a two-sided market using a quote message. The market maker will simply want the exchange to send a fill (execution report) upon a match, NOT a quote response of type accepted.
Unless you can send an execution report to the quoter (market maker), the Fixed Income model doesn’t work for market making.
As Nikhil indicates a suite of messages was added starting in FIX 4.2 to
address entering two sided markets for listed derivatives markets. As of
FIX 4.4 there are messages to enter a two sided market, request a
market, negotiate a market. We created three quotation models -
indicative, tradable, and restricted tradable. All are somewhat
documented in the FIX 4.4 documentation. There also is the Mass Quote
message that is useful for quote multiple option series for an
underlying. Even though the messages originated with derivatives and was
then adopted by fixed income there is no reason why the same messages
cannot be used across other asset classes.At least for Fixed Income, Vol 7 seems to describe exactly the
situation you are talking about. A tradable Quote and a Quote Response
would constitute the 2 sides. And an Execution Report is exacly how
the “Quoter” (the party that put out the tradable Quote) would notfy
the other party of the execution having been consumated.Are you looking at a very different situation?
Nikhil
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market.
But, if you want to change your market, the process is cumbersome.
You have to maintain each order separately.The quote message provides the four fields needed to make a two-
sided market, but the execution report doesn’t map very well in
response to a quote.I’d like to gauge if other firms are running into similar challenges
implementing market making functionality within FIX.
Yes, you are right. The model in the doc needs some tweaking for an exchange. But the key points remain that the Quote that the MM sends is a tradable quote, and if (as is probably very likely) sent in response to a Quote Request, then the original QuoteReqId or the Exchange generated ID in response to the Quote Request can be treated as the ClOrdID for the purposes of generating the Execution Request.
One option is to think of this entire process as a session and use TradingSessionID to tie together all the messages in the complete flow starting with the original Quote Request.
This gets very interesting when the exchange provides an auction model.
Nikhil
Jim, what suite of messages are you talking about in FIX 4.2 as Nikhil
mentions the Fixed Income model in FIX 4.4. Unfotunately, the FI model
does not work well for market making on an automated market.Nikhil, the quote message does allow you to enter a two-sided market.
But, the Fixed Income model requires the quoter to send the execution
report. That is the main problem for applying that model to an automated
marketplace.Imagine an exchange, where market makers send in a two-sided market
using a quote message. The market maker will simply want the exchange to
send a fill (execution report) upon a match, NOT a quote response of
type accepted.Unless you can send an execution report to the quoter (market maker),
the Fixed Income model doesn’t work for market making.As Nikhil indicates a suite of messages was added starting in FIX 4.2
to address entering two sided markets for listed derivatives markets.
As of FIX 4.4 there are messages to enter a two sided market, request
a market, negotiate a market. We created three quotation models -
indicative, tradable, and restricted tradable. All are somewhat
documented in the FIX 4.4 documentation. There also is the Mass Quote
message that is useful for quote multiple option series for an
underlying. Even though the messages originated with derivatives and
was then adopted by fixed income there is no reason why the same
messages cannot be used across other asset classes.At least for Fixed Income, Vol 7 seems to describe exactly the
situation you are talking about. A tradable Quote and a Quote
Response would constitute the 2 sides. And an Execution Report is
exacly how the “Quoter” (the party that put out the tradable Quote)
would notfy the other party of the execution having been consumated.Are you looking at a very different situation?
Nikhil
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market.
But, if you want to change your market, the process is cumbersome.
You have to maintain each order separately.The quote message provides the four fields needed to make a two-
sided market, but the execution report doesn’t map very well in
response to a quote.I’d like to gauge if other firms are running into similar
challenges implementing market making functionality within FIX.
Will, I think many MMs do want to receive the ack for their tradable quote for the same reason for the orders.
Rutie
Jim, what suite of messages are you talking about in FIX 4.2 as Nikhil
mentions the Fixed Income model in FIX 4.4. Unfotunately, the FI model
does not work well for market making on an automated market.Nikhil, the quote message does allow you to enter a two-sided market.
But, the Fixed Income model requires the quoter to send the execution
report. That is the main problem for applying that model to an automated
marketplace.Imagine an exchange, where market makers send in a two-sided market
using a quote message. The market maker will simply want the exchange to
send a fill (execution report) upon a match, NOT a quote response of
type accepted.Unless you can send an execution report to the quoter (market maker),
the Fixed Income model doesn’t work for market making.As Nikhil indicates a suite of messages was added starting in FIX 4.2
to address entering two sided markets for listed derivatives markets.
As of FIX 4.4 there are messages to enter a two sided market, request
a market, negotiate a market. We created three quotation models -
indicative, tradable, and restricted tradable. All are somewhat
documented in the FIX 4.4 documentation. There also is the Mass Quote
message that is useful for quote multiple option series for an
underlying. Even though the messages originated with derivatives and
was then adopted by fixed income there is no reason why the same
messages cannot be used across other asset classes.At least for Fixed Income, Vol 7 seems to describe exactly the
situation you are talking about. A tradable Quote and a Quote
Response would constitute the 2 sides. And an Execution Report is
exacly how the “Quoter” (the party that put out the tradable Quote)
would notfy the other party of the execution having been consumated.Are you looking at a very different situation?
Nikhil
Is there any precedence for making markets using FIX messages?
Certainly, you can send two orders for making a two-sided market.
But, if you want to change your market, the process is cumbersome.
You have to maintain each order separately.The quote message provides the four fields needed to make a two-
sided market, but the execution report doesn’t map very well in
response to a quote.I’d like to gauge if other firms are running into similar
challenges implementing market making functionality within FIX.