SEB Pioneers FIX for Cross-Asset

STOCKHOLM—Stockholm-based Skan din aviska Enskilda Banken (SEB) appears to be a cross-asset class pioneer as officials there tell DWT that they can trade foreign exchange (FX), futures and equity instruments—all via the FIX protocol.

"A client can connect to SEB via FIX and, in one order, trade in all these asset classes," says Christer Wennerberg, who is part of the E-commerce, Trading and Capital Markets (E-TCM) team at SEB Merchant Banking. Apart from fixed-income trading, FIX is used for all asset classes, according to bank officials.

To get to this point, the bank has been using technology from FIX technologies vendor Ullink, headquartered in Paris. The Ullink deployments began last year, and continue to the present.

In fact, SEB will deploy the Ullink technology for FX in the first quarter of 2006. The internally developed system will be known as SEB FX, the bank's FIX engine for FX trading, according to David Steiner, who is responsible for FX operations at SEB.

"We have ULBridge that is used to normalize the flow for our futures and equities operations," Wennerberg says. UL Bridge is a middleware solution enabling financial institutions to connect trading applications and execution venues via FIX.

"We want to offer our clients a single entry, yet have the possibility to use a 'best of breed' concept for market connectivity," says Wennerberg. ULBridge is connected to many systems—the Patsystems link for futures, the Orc Software platform for equities and futures, and the Front Arena system from Front Capital Systems for equities, he says.

Officials at Patsystems, Orc Software and Front Capital, which is part of SunGard, confirm that they are working with SEB. In the case of Orc, Per Anderson, global head of sales for the Stockholm-based financial software vendor, tells DWT that SEB has three Orc connections. "One for the SEB Futures office in London, and two for SEB Merchant Banking in equities and in FX," Anderson says. "Customers using their own Orc system can connect to the SEB Orc system, or if they use other software, they can connect to the SEB Orc system via FIX and use Orc market connections," he adds.

The bank receives all FIX orders via one FIX-based platform, and then the FIX engine, ULBridge, "routes these orders to the most appropriate platform," SEB's futures clearing manager Steve Martin tells DWT. "In the futures business, FIX orders are routed to Pats or Orc, depending on internal criteria," he adds.

SEB first applied FIX to FX trading in early 2003, confirm bank officials. SEB is using the FIX protocol for its clients who want to integrate their equity trading systems for FX transactions, according to Steiner. "Most equity systems are FIX-compliant today," Steiner says. "We chose FIX because it is an evolving market standard in equity trading that answers the needs of hedge funds and other buy-side firms," Steiner says.

Steiner estimates that between 10 and 20 percent of FX trades at SEB take place via the FIX protocol. But the Swedish bank is pushing to increase this figure. "It will depend on the market," he says.

On the equities side, 70 to 80 percent of the transactions go through the FIX protocol, says Wennerberg. "I think that figure will increase in the future, but I'm not sure if it will reach the 100 percent mark," he says.

SEB also uses FIX to connect to clients' portals as well. Steiner declines to name these portals. "The FIX protocol is the backbone of SEB's Trading Station. FIX allows the station to communicate with external systems," Steiner says.

Much like other banks, SEB is using several versions of the FIX protocol for its operations. SEB uses FIX 4.0, 4.1, 4.2 and 4.3. The predominant version, according to Wennerberg, is version 4.2. "We can also supply 4.4 if a customer desires it," he says. The 4.2 version was introduced in March 2000. It does not support confirmation and affirmations of trades and has limited trade reporting capabilities for equities, fixed income, futures, options and foreign exchange trading operations.

SEB does not expect to see a move toward the use of only one version of FIX. "We must let the clients have different versions [of FIX]," Wennerberg says. "We don't want to push them toward only one FIX protocol." The ULBridge solution has enabled SEB to juggle the multiple FIX versions in use among its clients.

One of the equity trading systems that SEB communicates with via the FIX protocol was EasyScreen. However, Steiner says that the connection is not active any longer.

In 2003, the London-based independent software vendor (ISV) EasyScreen announced that SEB Merchant Banking provided FX trading services to EasyScreen users through the hosted trading connectivity service dubbed Data Center. The deal added FX spot, futures and margin trading, and money markets deposits trading to the lineup of products users can trade via the Data Center. The setup required EasyScreen to connect its Data Center FIX API to the FIX API of SEB's own Internet-based FX platform, Trading Station (Trading Technology Week, July 7, 2003).

An EasyScreen spokesperson tells DWT that this service is still being provided but that the driver is disconnected. "If it is requested by a customer to provide that functionality, we would be able to do it," the spokesperson says. "It lies dormant because nobody is using it." Another EasyScreen spokesperson says that EasyScreen clients can only trade FX through SEB. "The majority of our clients trade only futures and options," the second spokesperson says.