1. The case for using FIX in the post execution space and how to implement John Wilson Director

2. Agenda n Confirmations - The current position n Why change to FIX confirmations n How to change n When to change n Further opportunities

3. Current position n Majority of firms have automated confirmation processing n Environment dominated by a few providers via proprietary infrastructure n Costly to use with charge usually levied on both buy and sell side n Industry efforts to change have floundered (GSTP, VMUs)

4. Current buy-side environment Fix Engine OMS Confirmation Matching Engine Confirms service ETL Orders NOE Confirmation Affirmation Allocations

5. Fix v4.4 n Released in April 2003 n Enhanced coverage of allocation and confirmation processing n Network and vendor neutral protocol n Open standard offered on many networks n Processing allocations or confirmations on a FIX connection incurs no additional costs n BUT its not a perfect substitute for existing services….. –Standing instructions –Non repudiation n Awaiting regulatory approval re disclosures and so forth

6. Why change to FIX confirmations n MONEY (Spend of > $75,000 pa on confirmations not uncommon) –Confirm charges –VAT/Sales tax –Connection charges –Maintenance/Subscriptions n Industry generates ≈ 250,000 electronic confirms outside USA each day (≈ 250,000 *$1 *2 *230 = $115m pa) n Current model is disconnected from the trading space

7. Not forgetting…… n Fix can encompass the automation of allocation processing n Communication of orders and executions can be automated via FIX n FIX works for multiple asset classes n Cost is shared across the entire process

8. How to change n Solution proposed is –Non intrusive with minimal change to existing confirmation infrastructure –Addition of FIX confirmation capability and NOT immediate removal of existing services –Not dependent on front office decisions on using FIX (but helps to consult)

9. Recommended buy-side environment Fix Engine OMS Confirmation Matching Engine Confirms service ETL Orders NOE Confirmation Affirmation Allocations ConfirmationsAffirmations Confirmations

10. How to change n Operating in the new environment –Run a separate FIX session on the same connection for allocations and confirms –Get FIX engine to do the transformation, subject to error handling facilities –Matching engine to prefix confirm source on messages to enable return routing –Migrate with your largest brokers first (savings come quicker and they will be better equipped)

11. How to change n Our recommendations –Tell your main brokers you will want to receive FIX confirmation in near future –Select a FIX engine with a pricing structure reflecting your plans –Discuss with your matching engine vendor introducing additional confirmation source –Either bring forward your SWIFTNet migration or look to alternate network vendor

12. When to change n You need to indicate interest to your brokers NOW n The lead time for “first mover” brokers is 4-5 months from interest being registered n Most major brokers could be ready in 5-6 months from now n Your project will take about 3 months in duration for < £20k

13. Settlement instructions n FIX does not address the SSI facilities most firms rely upon n Current SSI facilities remain costly with high errors rates reported n We think alternatives could rapidly appear if you concur with the concept(s)

14. “STP Lite” n Model 1 –Custodians broadcast SSI updates directly to the buy-side firms to append to (FIX) confirmation acceptances n Model 2 –SWIFTNet hub enriches messages in real-time from custodian SSI databases (that were originally constructed for GSTP) n Model 3 –Buy side firms notify sell side of which agent to deal with and then passes “conversation” over (Not a FIX capability yet!)

15. Useful material n “Confirmations cost calculator” n “How to FIX it Guide” n “Pitfalls of implementing FIX” n “FIX – The business imperative” n FIX Protocol version 4.4 n This presentation! www.CityiQ.com

16. Summary n FIX confirms will be able to substantially eliminate your confirmation costs n Solution can be implemented quickly and on a bi-lateral basis n Re-use of existing facilities positively encouraged n Some benefits will extend upstream if not already FIX enabled n Settlement instructions is the next challenge. Sign up today to make the world a better place!

17. CityIQ can help you with n Developing your business case n Aiding your prioritisation of requirements n Providing guidance on technology solutions to suit your needs n Planning and implementing your solution n Automating and refining your processes n Developing your control environment

18. CityIQ Limited 68 Lombard Street London EC3V 9LJ United Kingdom www.CityIQ.com T: +44 (0) 207 477 6580 F: +44 (0) 207 477 6768 E: Enquiries@CityIQ.com