[This message was posted by John Harris of BondMart Technologies, Inc.
<[email protected]> to the "General Q/A" discussion forum at
http://fixprotocol.org/discuss/22. You can reply to it on-line at
http://fixprotocol.org/discuss/read/c14d9da5 - PLEASE DO NOT REPLY BY MAIL.]
Excellent post, Mahesh.
I am aware that some exchanges and dictionaries define block trades in terms of
size. Such definitions are absurd. A block trade is a trade executed on
behalf of two or more legal entities ("accounts").
That said, I do not believe that FIX needs a block-related tag, because
"blockiness" can be inferred from other order details. If an order (or trade)
is allocated to more than one account, it is a block order (or trade).
Similarly, for those (silly) venues who prefer to define blockiness in terms of
size, if an order (or trade) meets or exceeds the arbitrary size threshold
established by the venue, it is a block order (or trade).
If it can be done without creating unnecessary message bloat or changing the
protocol for light reasons, I would favor defining "allocation" for FIX
purposes as "the act of assigning ownership of an order to at least one legal
entity." Thus, every order would be an allocated order and with respect to
allocations, the only differences among orders would be "how many" and "to
which accounts."
> [Start Quote from
> http://www.fixprotocol.org/pages/1448/matrix_def.htm#_Allocations]
>
> Allocations
>
> Allocations can be performed both pre- or post-trade. Post trade
> allocations are supported in the form of a separate FIX message type,
> whilst pre-trade allocation is achieved by sending allocation details on
> the order message itself.
>
> Pre-allocation functionality was not introduced until FIX 4.2. Pre-
> trade allocation is much more commonplace in the program trading
> community than it is in block trading hence the limited support
> indicated in the matrix.
>
> For the purposes of pre-trade allocation, a repeating group covering
> account and number of shares was added to the order message in 4.2.
>
> Cross border allocations support was introduced in version 4.1, as was
> support for allocating Futures & Options trades. Support for Fixed
> Income was introduced from version 4.3 of the protocol onwards.
>
> FIX 4.4 saw the introduction of a common allocation model across
> multiple asset classes for both cash and listed derivatives instruments.
> This work is on-going driven by the FIX Allocation Working Group and the
> FIA Extensions for Clearing Working Group.
>
> In FIX 5.0, the Allocations for Options Extension provides the ability
> to represent the open or close disposition of a trade or position on
> both the give-up and carry firm side of the allocation.
>
> [End Quote]
>
> >No manager of multiple accounts should ever submit a block order (and
> >hence obtain an execution of that block order) without knowing before
> >the fact the apportionment of that order among the accounts legally or
> >contractually responsible for it.
>
> Question : What differentiates a block trade from a non-block trade in
> FIX? I do not see any tag in New Order Single ^35=D^ which
> differentiates a block trade.
>
> [Start Quote from http://www.investopedia.com/terms/b/blocktrade.asp]
>
> In general, 10,000 shares of stock (not including penny stocks) or
> $200,000 worth of bonds would be considered a block trade.
>
> [End Quote]
>
> [Start Quote from http://en.wikipedia.org/wiki/Block_trade]
>
> ...It can also refer specifically to large trades that occur between
> institutional parties at a fixed price. For instance, an insurance
> company may hold a large stake in a company that they would like to
> liquidate completely. If this were put into the market as a large sell
> order, the price would sharply drop --- by definition, the stake was
> large enough to affect supply and demand....
>
> [End Quote]
>
> So should Allocation instructions be made mandatory for Orders which
> exceed the above mentioned size limits? or only when institutional
> parties are involved in a large trade? Or should a new boolean FIX Tag
> be introduced like "IsBlock" with values Yes / No be introduced, the
> absence of this Tag meaning No and Securities & Exchange Commision
> introducing rules forcing Block Trades to be identified as such?
[You can unsubscribe from this discussion group by sending a message to
mailto:[email protected]]
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
"Financial Information eXchange" group.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to
[email protected]
For more options, visit this group at
http://groups.google.com/group/FIX-Protocol?hl=en
-~----------~----~----~----~------~----~------~--~---
