FPL Assembles HFT Working Group

FIX Protocol Limited (FPL), the body responsible for the development and maintenance of the FIX messaging protocol, has established a working group to develop an optimized version of FIX for high-frequency trading.

The group, which is co-chaired by Mark Reece, e-trading solutions architect for HSBC, and Rolf Andersson, CEO of Pantor Engineering, will consider ways to remove overheads and make FIX more streamlined as a communications protocol at both the message and message transport layers.

Although the exact deliverables for the working group have yet to be defined, they are expected to include efficiency improvements around the encoding of messages as a thoroughfare to reduced latency, according to Reece.

"It takes time to walk down the FIX message and find all the relevant fields. It also takes time to convert the text representation of a number into a binary integer on which calculations can be done," says Reece. "For example, the current encoding for a 1 million shares order is =1000000#. With a binary representation of 1 million, the 11 bytes of the current FIX message could be just 4 bytes."

Reece anticipates that the first version of the new protocol will be verified by 2012, with precise objectives around encoding, session protocol definition, interoperability testing and a general review of FIX protocol to be delivered over the coming months.

SST Analysis:
Although FIX's current specifications are suitable for most firms operating at the leading edge of performance, these firms are finding that the protocol's existing encoding is starting to be a substantial overhead in processing an order. The FPL's decision to form the working group is a reflection of the fact that low-latency is infiltrating all aspects of the trading process.