Since its inception in the early 1990s as a bilateral communication framework for equities trading, the FIX (Financial Information eXchange) Protocol has continuously expanded to meet industry demand for support across additional asset classes and stages in the trade lifecycle. The opportunity to leverage FIX across these areas presents significant benefit to the financial community, as firms gain a competitive edge from automated and streamlined business practices. In 2003, the FPL Foreign Exchange Working Group was founded, clearly highlighting to the electronic trading industry that FPL was proactively working to expand the adoption and support of FIX within this market. In recognition of the growing importance of this work in 2005, the FPL Global Foreign Exchange Committee (GFXC) was created with participation spanning the foreign exchange community. This article aims to outline how FIX users may implement and integrate the FIX Protocol specifications for foreign exchange trading and the communication networks that may be applied to enable FIX usage to become a viable solution.

Firms wishing to leverage FIX for foreign exchange (FX) need to assemble four key building blocks and through their interaction they enable foreign exchange trade related messages to be communicated in an automated, transparent, and cost effective manner.

The four building blocks are:

1. The FIX Protocol
The FIX Protocol is a technical specification for the electronic communication of trade-related messages. From the basic functionality provided by FIX 4.0, the protocol has been developed and expanded to provide the advanced capabilities of FIX 4.4. A primary advantage of FIX for FX is the level of flexibility it delivers to the user community. While it presents a standardised messaging format, there is no single method of implementation for foreign exchange. Selecting the right way, depending primarily on your businesss requirements and workflows, is an essential part of ensuring a successful electronic trading operation.

2. A Foreign Exchange Order Management System
Order management systems (OMSs) are used to gather and net orders, potentially linking offices and desks worldwide. An OMS can be as simple as a home-grown spreadsheet or as complex as a vendor-maintained system.

3. A FIX engine
The FIX engine is the software that manages the FIX sessions over the network between an organisation and its counterparties. It parses incoming FIX messages and transforms the FIX messages into an internal format that the application can understand. It also takes messages from the application and creates FIX messages to send to counterparties.

4. A Communication network
The FIX engine together with a Communication Network is an organisations interface to the outside world connecting it to its counterparties, allowing it to trade and exchange information in a standardised fashion. There are a variety of communication networks available in the market and a number of factors should be considered when determining which would best meet your business requirements. The communication network is crucial to a successful electronic trading operation and community is the most important aspect of a network, as you can select the best technical network but if you are unable to reach your counterparties its value is questionable.

Cost is also a key point for consideration, by identifying trading volumes and the number of connections you plan to maintain, you may calculate the immediate network costs. Additionally the costs associated with redundant (backup) options should also be budgeted for.

Further points requiring attention are the level of service your business will need, the installation time frame you will need to work to, the network availability sought and the support infrastructure offered. Once these points have been considered network decisions may be made.

In today's market, leased lines, the Internet, and routing networks are all popular options with various features and benefits to each as defined below:

Leased Lines
A leased line is simply a direct connection between you and your counterparty via a telecommunications circuit. The connection is available all day, every day at a fixed cost, depending on the bandwidth of the circuit.