Do opportunities still exist for proprietary trading firms in Chicago?

By JIm Northey
November 10, 2016

While many in the financial industry share in my substantial concerns over market regulations and the resultant market structure impacts, there is a glimmer of hope.

Before we examine the current landscape, I think it is only appropriate to remind everyone of the history of proprietary trading firms in Chicago. Starting in the 1980s, these firms drove considerable financial and technological innovation that still continues today. They were some of the first to adopt UNIX and TCP/IP for systems. A couple of more well-known proprietary trading firms that were instrumental in pushing Sun Microsystems to support the software from Steve Jobs’ failed NeXT Computer company. This “life line” provided a bridge for Job’s return to Apple. Of course, that same software, Objective-C, is the basis for Apple today. When the derivatives markets in Europe converted to electronic trading systems, Chicago markets were some of the first participants. Orc Software, now Itiviti AB, arrived on the scene along with a few other platforms in 1987 and has continued providing cutting edge solutions to proprietary trading firms continuously for these past 30 years.

During September’s FIX Trading Community’s Chicago Briefing hosted by Thomson-Reuters, I was asked to moderate a panel discussing the future of proprietary trading in Chicago. The panel of industry veterans included Brennan Carley, Global Head of Frameworks at Thomson-Reuters, Keith Fishe, Founder and Managing Partner of TradeForecaster, and Rajeev Ranjan, Policy Advisor, Financial Markets Group, Federal Reserve Bank of Chicago.

The discussion started out with a dreary forecast on the future of proprietary trading in Chicago. Concerns over market regulations and the resultant market structure impacts dominated the initial part of the discussion. However, Carley took a more optimistic position regarding proprietary trading. He pointed out that as large banks comply with the Volcker rule that prohibits trading, this should create opportunities for independent firms. Even the move from active investment to passive investment should create arbitrage opportunities to help align pricing within the growing ETF segment.

Don Mendelson went on to present two important initiatives currently taking place within the FIX Trading Community. FIX Orchestra and the FIX Repository 2016 Edition is nearing its first release candidate that is on its way to becoming a FIX standard. FIX Orchestra aims to be a machine readable rules of engagement, not only for FIX, but for any messaging protocol. Itiviti used the current working draft version of FIX Orchestra on a project with eTrading Software for the Association of National Numbering Agencies (ANNA) to generate JavaScript Object Notation (JSON) based messaging and Web based user interfaces to support the real time assignment of ISIN (ISO 6166:2013) identifiers for OTC derivatives to comply with the European Securities and Markets Authority (ESMA) regulations in Europe. This project helped to test and prove FIX Orchestra’s capability to define and generate a non-FIX messaging protocol, while at the same time also generating FIX Orchestra. Mendelson went on to discuss the new high performance protocols from FIX. The Simple Binary Encoding wire format is gaining adoption globally; in fact, it was pointed out that one of the first adopters, Thomson-Reuters, uses it for their market data feeds within some of their products. The FIXP–high performance session layer–has now been updated with Release Candidate 3. We expect to see FIXP be elevated to a draft standard within the next year to eighteen months.

This brings up another topic–in 2015, FIX Trading Community decided to open the technical standards process up to non-FIX members in order to draw on the best technical minds in the industry. All FIX technical products are now housed on GitHub (

Despite challenges due to regulatory response, the Chicago markets will continue to be a vital part of the global financial markets and innovations in trading and technology will originate from LaSalle Street. If you missed this engaging debate, I invite you to join me in Boston as I’ll also be moderating a panel on the bond liquidity crisis at the November FIX Boston Americas Trading Briefing.

FIX Boston–Americas Trading Briefing
Monday, November 14th
State Street Global Markets, Boston

For details, visit

Jim Northey, Principal Consultant and Industry Standards Liaison, Itiviti

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