FIA and FIA Tech have announced the successful implementation of execution source codes at CME Group.
Over the last several months, the three entities have worked with market participants to make what they term “the necessary adjustments” to trading systems to support a new industry standard, which will allow for greater automation and efficiencies in post-trade processing. On November 17, FIA’s execution source code schema was adopted on the CME Globex platform. Although other exchanges are supporting the addition of execution source codes, CME Group is the first to require all order messages have this code in order to be processed for trading and clearing.
“This is an important milestone in our effort to solve a common pain point in trade processing,” says Don Byron, global head of operations at FIA. “By making it a mandatory requirement, CME Group has accelerated the adoption of this new standard. We look forward to working with other exchanges to implement execution source codes worldwide.”
FIA says the development and implementation of the industry standard will make it possible for market participants to track how trades are executed through the use of a set of six codes developed by FIA and FIA Tech. This will reduce long-standing problems in the settlement of brokerage fees and help executing brokers and clearing firms move toward greater automation in post-trade processing.
“We are pleased to support the FIA’s execution source code schema, requiring a new tag on every order entry message sent to CME Group markets,” says Julie Holzrichter, chief operating officer, CME Group. “At the request of the FCM community, we have worked closely with FIA and the industry over the last year to prepare our customers and vendors for this change, and we look forward to helping market participants gain operational efficiencies as a result.”
The implementation of execution source codes is the culmination of almost a decade of work by FIA and FIA Tech to create a standard set of codes to identify widely used methods for executing trades. Those methods range from fully automated algorithmic trading to human-to-human interaction over the telephone. Adding these codes to order messages allows information about the execution method to be carried forward through clearing and post-trade processing. That is particularly important when clients use one firm for execution and another for clearing.
“When a trade is executed by one broker and given up to another for clearing, the execution method is not passed on and the clearing broker has no visibility how the trade was executed. This increases the workload on operational staff and creates disputes over brokerage fees,” says Mark Davis, senior vice president and head of strategy for FIA Tech, the technology services affiliate of FIA. “Implementing these codes on an industry-wide basis will improve operational efficiency and support greater automation in post-trade processes.”