FIX Trading Community is pushing for wider adoption of a standardised methodology for communicating exchange and platform outages, as growing trading volumes and increasingly complex market infrastructure heighten the risks of market disruption and delayed information.
Speaking to Trader TV, Jim Kaye, executive director at the non-profit standards body, discusses the FIX framework announced in June, which standardises outage content and taxonomies across communication channels aimed at helping firms receive and process information about venue disruptions more quickly and consistently. Kaye also examines the market’s response to the methodology so far and outlines the next steps towards wider adoption.
Interview
Josephine Gallagher – Welcome to Trader TV, where we explore the trends shaping global markets and institutional trading. Today I’m joined by Jim Kaye, executive director at FIX Trading Community, to discuss the challenges that can arise when exchanges and platforms experience outages and the growing importance around communicating these broadly to the wider market when these disruptions occur.
Jim, welcome to the show.
Jim Kaye – You’re welcome, thank you for having me.
Josephine Gallagher – So, just to start us off, like why is outage communication such an important issue for the industry right now?
Jim Kaye – So, I think the first thing to clarify is that it’s a growing issue, not necessarily because there are more outages. I think it’s more a question of people recognising that when outages do happen, they need to be able to react quickly and accurately. As trading volumes grow, the potential financial impact of making a poor or delayed decision on the back of an outage is just increased. And also, because financial infrastructure more generally is just much more distributed, much more complicated than it has been in the past. So, you know, an outage can affect different firms in different ways, and they really do need to know quickly and accurately what it is that’s going on so they can make the appropriate response.
Josephine Gallagher – Understood. And when an outage occurs today, like how are those disruptions actually communicated and what are the main problems with the current approach?
Jim Kaye – So, generally firms who actually communicate this information at all, and we will probably focus mostly on venues, exchanges and similar, though this of course is not just about those sorts of firms, but who are probably the most sophisticated in this regard. So, they will generally use one of say three different ways of communicating. One would be they’ll have a website with status information on their various platforms. They will often use some kind of email communication to participants that they’re connected to. And often there will be phone calls from their support teams. And those all have strengths and weaknesses. The website, of course, is, you know, you’d think it would be completely up to date and of course it’s visible to everybody, but you have to be looking at it, which is not very helpful if you’ve got many of these things to look at the same time. Email, of course, can be slow, can be delayed, and might not get through. And phone calls, there are always more people to talk to than there are people doing the talking. So, you inevitably get some queuing and preferencing of people that creates an information asymmetry in the market, which also has its problems. So, none of them are perfect, but they are all used. And I think one of the things that we’re looking to do in terms of coming up with common machine-readable electronic standards for all of this is basically to avoid all of those situations. You want a push of a material that goes out to everybody who needs it at the same time.
Josephine Gallagher – Okay. And back in June as well, you announced your own fixed methodology standard for outage communication. So, can you tell us like what that standard would actually do, how it would work and like what it would actually mean in practice for buy sides and market participants?
Jim Kaye – Yeah. So, the key thing, and I’m really glad you picked up on the word methodologies, because we don’t want people thinking this is basically FIX messages or has to be FIX messages. It’s a design. It’s a message design, which is intended to be used over really any transport you wish to. So, you could render your websites using this methodology, you could do emails using this methodology, you can send machine-readable messages if you want to. The key point is that the workflow and the content of these things is highly standardised. So, we’re talking about standard taxonomies for things like scope of an outage, the nature of an outage, to some extent, even the severity of an outage. And the point being that if you can codify that up in a standard way, then two things happen. One is that you have half a chance of actually directing this into a system you have, which speeds up information flow within a firm. And the other is that if everyone implements things the same way, then firstly, it’s easier to implement from a receiving end, but also it means that venue A has an outage of a certain type and venue B has an outage of the same type on hopefully different days. They represent the same way. You know what it is you’re looking at.
Josephine Gallagher – Understood. Now creating and adopting a standard does come at a cost to brokers, venues and the buy side. So, what has been the response to this so far and what are the next steps for the standard to be widely adopted?
Jim Kaye – So, it’s early days in terms of the adoption side of things. We’ve pushed out the guidance and the fixed changes back in June. We’ve done some extra work on the worked examples and we will continue that in our working group. But really this is about going out to talk to venues, talk to brokers, talk to buy-side firms about what it is we’re doing and why it is useful for them. Of course, this has not been done in isolation. This has been put together by representatives from those communities. So, you know, we’re pretty confident in the design, and we definitely know there are people out there who believe quite strongly in this. It’s just a question of going out to the broader markets and actually pushing this. What we, of course, don’t want to do is wait for a major market outage to kind of wake everybody up again. And one of the big challenges with this type of work is that people tend not to think about outages and those sorts of resilience scenarios too much when they’re not actually happening. So, we need to go out there and basically convince the industry that this is a worthwhile exercise and that the cost they have to pay is one thing, but it has to be balanced against the opportunity cost of not being able to respond to an outage in the financial infrastructure rapidly and accurately.
Josephine Gallagher – Understood. Thank you, Jim. We could talk at length about this topic, but I’ll have to leave it there. It was lovely having you on. Thank you for joining us.
Jim Kaye – Thank you, thank you for having me.
Josephine Gallagher – I’d like to thank Jim for his insight and of course you for watching this has been Trader TV.
