Meet Alpha Omega Financial Systems, a new warrior in the FIX-for-post-trade crusade. The San Francisco-based startup is driven by the belief that the FIX protocol will eliminate manual systems and deliver new efficiencies to operations. The company argues that firms can cut their post-trade costs for equity transactions by 30% if they extend their FIX-based infrastructures.
These startling claims are part of the vendor’s white paper, “Looking Back to Shape the Future” published last month.
This latest FIX-for-post-trade warrior says that FIX can provide bilateral matching between buy-side firms and broker/dealers by helping ease the flow of execution and allocation details passing from order management systems to post-trade systems. Industry veteran Ignatius John, president and co-founder of Alpha Omega, has already proven that it can be done.
John, who has 30 years of experience on the buy side, most recently served as global trading strategist for AXA Rosenberg where he deployed a FIX-based post-trade solution in 2008. He held many posts at AXA Rosenberg, managing business strategy, and product and technology development. Another previous employer was global custodian State Street Bank where he helped develop real-time trading technology.
Ignatius John, president and co-founder, Alpha Omega.
The white paper includes a history lesson about how the Financial Information eXchange electronic trading protocol took off during the nineties to become the standard for guiding trade execution and related messaging standard. FIX also inspired the industry to think in terms of fully electronic, straight through processing (STP), one of the many fintech dreams deferred.
FIX helps the front office mitigate risks with execution and provides other benefits including greater efficiencies. The dream is to extend those benefits and lower post-trade costs.
“I just want to make it very clear, Eugene, that it’s not Alpha Omega who’s trying to push FIX as a post trade solution in the market,” says John. “The market has started moving in that direction.”
Major asset managers, many of whom are involved with the FIX Trading Community — the organization established to push the protocol — are moving toward a FIX post-trade solution. “They have made it very clear to their leading brokers that they need to be on a FIX 4.4 platform and the big, bulk, large brokers are already there,” John says.
Alpha Omega has been doing its part and has a client running its flagship product, FIXAffirm, which connects counterparties to the automated allocation, confirmation and affirmation of trades for equities and fixed income securities, John adds.
But John and the other warriors are also hoping that FIX for post-trade processing will appeal to the buy side’s need to do away with manual systems.
“Especially for a smaller asset manager — their back office is predominantly manual where they send just faxes or emails with an attached file,” John says. “Now, since we are using FIX, we look at the post-trade process to be a natural extension of the existing trading platform. Because of that, and I would say 99% of the trades that are done globally are all via FIX, which is all electronic. We have to be able to incorporate or integrate our application within the order management systems, then they have a post-trade solution right away.”
John says that when he met with two asset managers in New York last month, “they asked, ‘How can you help us with this?’ We said, ‘This is what we will do. Whatever files you generate and sending out to the brokers, we can take that file, normalize it into a FIX formatted file, then communicate to the broker,’ ”
Sell-side brokers are also embracing this FIX extension because “now they can get rid of their manual processes too,” John says. “That is really how the process is beginning to evolve.”
At the end of the day, many buy-side firms such as hedge funds on the rise “feel the pain” of manual or horribly inefficient systems “because … when their assets under management are smaller, the number of trades are much higher in some cases,” John says. The problems hit home when there is a rather high number of trades that have to be efficiently processed or else the firm faces serious bottom-line woes.
Alpha Omega’s next big step is to forge ahead and reach out to OMS vendors. “We have done a lot of analysis and shown them how efficiently we can extend their platforms into the post trade world,” John says.
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