What is a Financial Information Exchange?

Originally known as the Fidelity Information Exchange, the financial information exchange or FIX is a system that is utilized to manage the accurate and orderly transfer of data between security exchanges. The timely flow of information that results from the use of this system makes it much easier for the users to make informed decisions on what to buy and sell, thus increasing the opportunity for earning a return on each transaction. Originally developed to support efficient equity trading between the firms of Salomon Brothers and Fidelity Investments, FIX is now used by a number of different firms around the world.

Since its inception in 1992, the structure of the financial information exchange has undergone continuous upgrades. As FIX became increasingly accessible, increasing numbers of securities exchange houses began to make use of the data transference capabilities as a means of managing both purchases and sales. Along with the original function of managing data regarding equity trading, the financial information exchange system also supports investment activity with derivatives, foreign exchange, futures, and fixed income investments. These additional functions have made the system increasingly popular with users who require the latest available information on trading activity in various markets in order to make decisions regarding what to buy, what to sell, and how long to hold onto a given asset.

The range of customers who make use of the financial information exchange varies from brokers who execute orders on behalf of their clients to investment banks and even entities that manage mutual funds. Many of the major stock exchanges around the world also utilize FIX, simply because of the efficiency of data transfer and the accuracy of the information that is shared across the network. Many consider the use of this exchange as essential to the pre-trade process, since the data is often transmitted in real time fashion, a benefit that allows investors to make decisions based on the latest information available.

The expectation is that the financial information exchange will continue to expand, providing access to data regarding activity in more markets around the world. While this tool has found its major use in front office situations, the broadening scope of applications is anticipated to make the tool equally useful in back office settings. In time, FIX is anticipated to include data that will help with evaluating block-trade allocations as well as additional processes associated with the trading process, allowing investors of all types real-time access to information about every type of investing opportunity currently available.