practitioner’s view – fix standards in post trade given by - alvin mullan director, ubs nov 2004
TRANSCRIPT
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UBS’s participation with industry groups
Our competitors are doing it
Our clients want it
We need to do it
UBS – SWIFT & OMGEO
ISITC, RDUG, QDI….
FAWG & STPLite/SSIFresh
This presentation aims to- summarise how FIX can be used in the Allocation and Confirmation
process
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Pre trade allocation
Pre allocated order – FIX New Order Single
When Allocation Account details need to be communicated prior to execution in certain markets
Issues with Pre allocated orderAmend scenarios complicated
1 Account
660 AcctIDSource
581 AccountType
589 DayBookingInst
590 BookingUnit
591 PreallocMethod
70 AllocID
78 NoAllocs
79 AllocAccount
661 AllocAcctIDSource
736 AllocSettlCurrency
467 IndividualAllocID
component block <NestedParties>
80 AllocQty
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Model 1 – Buyside wants to be involved in SSIs
Buyside Sellside
Agent
SSI Database
Global Custodian
Agent
SSIs
CSD
Affirmation
THIS IS BEST SUPPORTEDFIX 4.4 Allocation
FIX 4.4 or MT515 for Confirmation
Allocation + SSIs
1. Order (ClOrdID)
2. Order Details (AvgPx)
3. Accounts
SSI is used as sent
Match?
Confirmation - 1 per account + SSIs X2
1. Financials
Match?
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Model 1 - Strengths and weaknesses
Cost saving- Reduction in settlement failures- Less manual intervention- Less effort to maintain SSIs
Industry take up- Time to change- Adoption of FIX 4.4- But some middleware suppliers can provide solutions to help
Matching- In-built matching from FIX order & execution lifecycle (inc. ref nos)- No need to match buyside SSI
Reduced Risk- Faster turn round on allocations- Lower error rate
PSET- Broker is instructed where settlement is to occur- If instructed to use Euroclear, can match immediately
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FIX 4.4 allocation message
Level 0 Level 1 Level 2
Message Body
Contains 1
Message Definition Defines type and purpose of message and contains
message identifiers Contains Many
Orders
Optional repeating group identifying the orders being booked and/or allocated together with their price and quantity being booked/allocated. This is mandatory in FIX but is currently should have at least one occurrence on a message to UBS.
Contains 1 Booking Unit
Defines the booking unit being booked and/or allocated (e.g. security, side, price, trade date) TransactTime is included here although viewed as being part of the Message Definition section.
Contains 0 or many
Allocation Details
Contains 1 Commission Details
Fields defining commissions (either a rate or an absolute value)
Contains 0 or one
Trade Net Monies Optional fields defining net monies and settlement amount
Contains 0 or many Fees Optional repeating group defining fee and expense details
Contains 0 or many
Settlement Instructions
Optional repeating group defining buy and/or sell side settlement instructions. See section below.
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FIX 4.4 confirmation message
Level 0 Level 1
Message Body Contains1 Message Definition Defines type and purpose of message and contains message
identifiers Contains1 Firm Identification &
PSET
Contains1 Instruction Identification
Contains1 Instrument Detail Contains1 Trade Identification Text is in this group although it would be better placed in
Message Body Contains1 Trade Net Monies Contains 0 or many
Settlement Instructions
Repeating group defining buy and/or sell side settlement instructions
Contains1 Commission Details Fields defining commissions (either a rate or an absolute value) Contains 0 or many Fees Optional repeating group defining fee and expense details
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SSI baggage in FIX
ISO 15022 Def SettlPartyIDRole <784>
SettlPartyIDSource <783>
SubIDType <786>
PSET 10 = Settlement Location (PSET) B = BIC
DEAG/REAG 30 = Agent or 4 = Clearing Firm (But only 1 of. Pilot Client will be using value of 30.)
B = BIC 10 = Securities Account Number 22 = Securities Account Name 17 = CSD participant/member code
DECU/RECU 28 = Custodian or 31 = Sub-Custodian (But only 1 of. Pilot Client will be using value of 31.)
B = BIC 10 = Securities Account Number 22 = Securities Account Name 11 = Registration number 14 = Registration name 17 = CSD participant/member code
BUYR/SELL 27 = Buyer/Seller
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Model 2 – Buyside opt outBuyside Sellside
Agent
SSI Database
Global Custodian
Agent
SSIs
CSD
Affirmation – Needed?
Confirmation - 1 per account + SSIs X2
Allocation + Custodian + Financials
1. Order
2. Order Details (AvgPx)
3. Accounts
4. Financials
Match?
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Model 2 – Step by step
Parent OrderBuy 1000 Nokia FIX New Order - single
ClOrdID= AM1, Buy, 500, Nokia
FIX Execution Report
ClOrdID= 1, OrderID=Brok1, Comm=8bp
Child Order receivedand Commission
returned
FIX New Order - single
ClOrdID= AM2, Buy, 500, Nokia
FIX Execution Report
ClOrdID= AM2, OrderID=Brok2, Comm=8bp
Single Allocationfor Parent Orderover 3 accounts
FIX Allocation
ClOrdID= AM1, AM2, Buy, 1000, Nokia,Account= Acc1&GC1. Acc2&GC2, Acc3&GC1
FIX Confirmation or MT515
Account= Acc1. SSI *2
Account= Acc2. SSI *2
Account= Acc3. SSI *2
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Model 2 - Strengths and weaknesses
Cost saving- Reduction in settlement failures- Less manual intervention- Less effort to maintain SSIs
Industry take up- Can be done now using FIX 4.0/4.2 Allocation message with MT515 Confirm- But some middleware suppliers can provide solutions to help
Matching- In-built matching from FIX order & execution lifecycle (inc. ref nos)- Broker obtains Buyside SSI from local database/Custodian- Financials can be provided on FIX Allocation message enable Sellside match
Split holdings- May lead to split holdings for dual listed stocks- E.G. Nokia traded in Germany, Sweden….- On sell, may need auto-transfer of stock arrangements with Custodian- Or on-going reconciliation/management
Reduced risk- Faster turn round on allocations- Lower error rate
PSET- Broker chooses PSET based on defaults for Buyside and Place of Execution- When required, broker enquires from identified Custodian
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Model 2 – Can be done now
• Insulation- Third party “middleware” suppliers can convert single output format from OMS into different Broker requirements- Same can be used to process confirm
• Broker maintains SSIs- Broker will require relationship with Custodians for SSIs- Once SSI is held by Broker, how is a change communicated
• Buyside matching- Can get Broker to do the matching removing the need to have and maintain matching processes.
• SWIFT confirm- Already used in many back office environment
• FIX allocation- Send FIX 4.0/4.2 Allocation- Does not need an expensive OMS upgrade to FIX 4.4