FIX Algorithmic Trading Definition Language

Webcast Wednesday, April 7, 2010

Rick Labs, CPA CFA, Co-Chairman FIX Algorithmic Trading Working Group

Agenda What is it, and what will it do for me?

Overview Templates Algos as Functions Widget Library Formal, electronic expression of an algo order ticket What does this do for the Buy Side

How do I obtain FIXatdl functionality? Ask all brokers with “one voice” we want FIXatdl v1.1 files Tools to parse and render FIXatdl files

What is the brief history and likely adoption trajectory? Development of v1.0, v1.1 and current feature set Examples of current product in the market Projected Adoption Rates

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FIXatdl – exactly, what is it? A language that helps define algo order types

FIXatdl is just a standard “template” to describe: The way an order ticket is suggested (by the BD) to look on the trader’s

screen How the new order message must be constructed on the FIX wire How the order may be validated locally prior to sending it to the BD How work flow may be implemented – e.g. panels and screen widgets

that appear or disappear, based on other settings, help text, tool tips, etc.

FIXatdl – exactly, what is it? –2- The FIXatdl “template” is industry agreed upon, formally specified.

Several benefits accrue: It’s economically trivial for a BD marketing algorithms to create XML files

from the templates. Order Management Systems and Execution Management Systems can

be programmed to understand the FIXatdl “template” with a one time effort.

FIXatdl technology still requires some testing of each new algo strategy

FIXatdl, is a meta, meta standard It’s files (Schema) that express how to publish yet more files (XML)

that will express how each order ticket is to look & work (to the trader) that will be used on traders workstations to create actual new order messages.

(regular FIX messages typically in classic Tag=Value syntax)

In FIXatdl all Algos are Functions

Inside FIXatdl, algos are just considered “function calls”. The are “calls” made by a trader, the Sender, and communicated to a Target. The Target actually executes the algo’s logic.

A simple limit order can be considered an algo - “wait on the sidelines, till this price limit, which may or may not be hit, comes along. Then, if it does, by all means fill my order, up to x shares…”

In an algo (such as the above limit order) there are parameters including: ticker, start-time, and end-time; and values, including number of shares and limit price.

In FIXatdl we simplify – parameters and values are both just considered named FIXatdl parameters. (no distinction of values vs. parameters)

FIXatdl is one-way communication. “The Sender lights the fuse, and the bang goes off at the Target. This has latency implications.

The end result of all FIXatdl functionality is a FIX message. Its absolutely plain vanilla FIX 4.0, 4.1, 4.2…. FIXatdl allows any version to be used.

GUI Widget Library – Functional and Descriptive Only, Not Language Specific

Clock

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TextField

SingleSpinner

DoubleSpinner

CheckBox

CheckBoxList

RadioButton

RadioButtonList

DropDownList

Slider

Label

EditableDropDownList

SingleSelectList

MultiSelectList

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FIXatdl is an all electronic, formal specification of an Algo order ticket

+Strategy

7620=Tazer 7621=1 9998=100 9999=0.35 168=20100319-16:00:00 126=20100319-17:00:00

Broker’s paper documentation

of their algos

FIXatdl v1.1 Industry wide

Schema

Broker authors FIXatdl XML instance file

From the xml file the algo order

ticket is automatically

drawn

Resulting message is

classic FIX – in the exact format

the Target wanted it in

What does this do for the Buy Side

• Less Ambiguity• The FIXatdl standard is itself formally expressed in electronic Schema files• Instance files must follow the FIXatdl Schema files, and are testable.

• Must be well formed xml• The contents must validate specifically against the FIXatdl Schema

• Industry agreed upon widget library• The Target authors and supplies the file, exactly the way they want to receive the

resulting FIX messages. They provide the exact “recipe” the OMS cooks to. • XML Files are Machine Readable!

• The parser / renderer code is written once. After that, all compliant FIXatdl xml

instance files, from all sources, should work equally well. • Algorithms can then be added or changed without custom programming

• Reduced need for QA and Certification Testing• XML technology automatically tests for compliance against the standard• Simple changes to well known strategies can take “minutes vs. months”

• Faster time-to-market for algo providers with less integration hassle

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How do I obtain FIXatdl Functionality?

Ask all brokers with “one voice” we want our FIXatdl our v1.1 files! Everyone is on equal footing. Cost for a BDs to make a FIXatdl file is almost nil. At the outset, even if you can’t fully “digest” a FIXatdl file electronically you will

find them very helpful1. Can often employ relatively simple Extensible Stylesheet Language (XSL) Translations to

go from a industry standard FIXatdl instance file, most of the way into a highly proprietary system. (You only write the translator script once using xslt. After that 70-90% automation may be immediately achievable. Only the left over work is done by hand.

2. The discipline of creating a FIXatdl file that is well-formed and validating eliminates ambiguity across the industry. FIXatdl is a formal specification with “rules” that must be followed. You can quickly check any file you get to see if it “passes” the tests.

Ask for foreign language FIXatdl versions of algos if you have any need for them

Experiment with the free, open source tools to parse and render \ atdl4j Open source http://va.fixprotocol.org/products/detail/5561

Ask your OMS / EMS providers when will you have 100% FIXatdl v1.1 compliance? Others are already there! Tell them, we don’t want to wait!

History and likely v1.1 adoption trajectory “The beginning” (pre v1.0)

Concept initiated by sell side – wanted to deploy algos faster Sell side quickly recognized OMS community needed to buy in In depth OMS vendor input - 5 separate recorded, transcribed, depth interviews. After much development effort detailed Schema created and broadly agreed

upon, based on all known interview based requirements at that time Broker’s invited to publish xml sample files under that standard 15 major brokers published XML file samples in relatively short order Changes were made to the schema as various BDs went to publish sample

strategies FIXatdl 1.0 Released - March 2008

Brokers had published sample XML files, but no parsers/renders were yet available to implement those files

v1.0 then taken BACK to a wide sample of OMS players to implement in code OMS vendors identified many additional needs Responding the additional requirements (that had not come out in the initial

verbal interviews) took considerable time and effort

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v1.0 – Broker Supported / v1.1 – OMS “Anointed” v1.1 added numerous features and functionality deemed by the OMS

community to be essential (after they saw sample xml files and the Schema) Decoupled “data contract” (constructing the FIX message on the FIX wire)

from the GUI / Widget area – establishing clear cut isolation between model, view and control.

Enhanced GUI Library slightly Better aligned FIXatdl XML with broad FPL XML standards New, formal written documentation - 8 rounds of revisions. Half dozen firms commercially coded against the evolving v1.1 standard Several dozen builds March 2010 FIXatdl v1.1 officially accepted as a FPL standard

Other Major Enhancements in v1.1 Major refactor - division and isolation of data contract (FIX message on the

wire) from GUI (Control/Widgets) Created FLOW to handle workflow and basic GUI event handling Enhanced FLOW and VALIDATION rules to allow cascading (nesting) FLOW and VALIDATION rules can now be expressed globally and reused

across strategies. Control/Widget visible, enabled, and value can be rule driven (StateRule) Strategy filtering enhanced (Regions/Country, SecurityTypes, Markets) Explicit support for multi-language features via UTF-8 Support for New Order List and New Order Multileg Slightly enhanced GUI Library (generic, cross-platform description of

widgets)

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Trajectory High initial and massive “latent” interest by BDs OMS / EMS input was obtained early. We listened and responded! OMS / EMS real requirements didn’t become obvious till they had a Schema

and sample XML instance files in their hands. From there, they started the slow process of really “attending” to what they needed.

v1.0 rallied the BDs. v1.1 is all about actual commercial adoption at the OMS level, completing

the lab to commercial launch. V1.0 had xml samples, v1.1 has real, production level code to use the xml, and production level instance file, not “samples”. Parsing the xml Rendering the widgets on the screen Coding once and having the ability to handle new algorithms without recoding

after that v1.1 has been so successful at garnering commercial OMS/EMS and tool

adoption to date, its eventual roll out and acceptance in the broad commercial markets appears virtually assured.

Commercial examples best Illustrate the uptake. Here are a few:

<?xml version="1.0" encoding="UTF-8"?> <Strategies xmlns="http://www.fixprotocol.org/ATDL-1-1/Core" xmlns:val="http://www.fixprotocol.org/ATDL-1-1/Validation" xmlns:lay="http://www.fixprotocol.org/ATDL-1-1/Layout" xmlns:flow="http://www.fixprotocol.org/ATDL-1-1/Flow" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:schemaLocation="http://www.fixprotocol.org/ATDL-1-1/Core atdl-core-1-1.xsd" strategyIdentifierTag="847" versionIdentifierTag="9682" tag957Support="false" changeStrategyOnCxlRpl="true" imageLocation="NOMURA.JPG"> <Description>A recognized global leader in Electronic Trading, Nomura offers a fully integrated solution combining DMA, algorithmic execution via the ModelEx suite, and electronic guaranteed capital products, supplemented with pre-, intra- and post-trade analytical tools. All execution channels are underpinned by next-generation smart order routing logic and integration with Nomura's NX dark liquidity pool. Europe: +44 207 103 5485 Japan: +81 3 3244-3347 Asia: +852 2252-6700 US: +1 212 667-1146</Description> <!-- IS --> <Strategy name="IS" uiRep="IS" wireValue="3" version="1.4.3" fixMsgType="D" providerID="Nomura"> <Description>Minimize slippage relative to arrival price (implementation shortfall) based on user tolerance for risk or market impact.</Description> <Regions> <Region name="EuropeMiddleEastAfrica" inclusion="Include"/> </Regions> <Parameter name="TargetSubID" xsi:type="String_t" description="" mutableOnCxlRpl="false" fixTag="57" use="required" constValue="MODELEX" const="true" definedByFIX="true"> <Description>Instruction to route to Nomura ModelEx.</Description> </Parameter> <Parameter name="HandInst"

Projected Adoption Rates My personal predictions are as follows: By year end 2010 virtually every budge bracket BD that markets

algos will provide a FIXatdl v1.1 xml instance file of all their algo strategies

By year end 2010 we will see several foreign language FIXatld files including for certain Kanji and Cantonese.

And…

"50% of all equity algo trades, originating from a human "50% of all equity algo trades, originating from a human trader, will flow through a FIXatdl interface within 24 months." trader, will flow through a FIXatdl interface within 24 months."

Rick LabsRick Labs, CPA, CFA, Co-Chair FPL Algorithmic Trading , CPA, CFA, Co-Chair FPL Algorithmic Trading Working Group, Managing Member, Working Group, Managing Member,

CL&BCL&B

www.fixprotocol.org/FIXatdl

See especially the testimonials link