In the past one key criteria for evaluation of FIX networks has been size. Typically this has been driven by buy-side RFPs that ask for a list of brokers that are connected to the network. And, since the cost of that connection to the buy-side is trivial, the old rule was "more is better".
With the advent of MIFID 2 the question of inducements comes into play. We believe that the FCA is going to issue a clarification on this question:
"If a buy-side connects using a FIX network and the sell-side is paying (say) $500* per month for that connection, is that an inducement to the buy-side? If yes, then will this be prohibited under MIFID2?"
If this clarification is issued and states that FIX networks are now no longer going to be able to bill their sell-side clients what happens next?
Buy-sides will be faced with an initial bill of $500 multiplied by the number of connections. Let's take a pretty middling number of equity FIX links for a >€100bn AUM long-only equity shop of say 50 connections. So that's $500x50 = $25,000 per month = $300,000 per year.
First response will no doubt be short, sharp and end with "... off!"
So what happens then? The cull of connections will start. Since for all those lovely timestamps for MIFID 2 you really need FIX, so there will not be a shift back to the telephone. And of course buy-sides will haggle the price down.
So - where does that leave firms that rely on a pure-play FIX network as their value proposition? I would suggest "struggling". They will have to cut costs to a right sized model. And that requires investment. Square that circle if you will...
And I will. The answer is FIX Orchestra - the standards compliant re-engineered implementation of our very own FIIDL. "Orchestra is the full stop at the end of FIX. Risks and costs can be cut and time to market and efficiency improved"
* Note - $500 per month used as it's a round number, other prices are available!