FIX Calls for Enhanced Standards in Tokenised Assets
FIX Trading Community warns that lack of standards could slow adoption of tokenised assets.
1The Rise of Tokenisation and Standardisation Gap
FIX Trading Community highlighted the need for standardisation in data, workflows and market practices for wider adoption of tokenised assets. Platforms like Robinhood and eToro have started offering hundreds of tokenised stocks in Europe and the US. However, FIX argues that lack of standards, rather than technology, is hindering adoption. Business cases in areas like post-trade and collateral management are already mature.
2Concerns for Global Markets
While responding to a UK-focused consultation, FIX noted that the standardisation issue is global. Its Digital Asset Technology Committee includes market operators, investors and technology providers. FIX Executive Director Jim Kaye emphasised the need to standardise chain-to-chain connectivity, common instrument identifiers and links between digital asset platforms and exchanges.
3Technical and Operational Challenges
FIX identified gaps in wallet addressing, mapping to legal entities and a common taxonomy for corporate actions. Lack of data encryption standards increases the risk of customer data exposure. Additionally, there are no agreed standards for digital asset settlement instructions. These gaps pose risks to market integrity and customer protection.
4Industry Developments
CMC Markets tested tokenised share trading in the UK. Murex and Quant are working on integrating digital assets into existing workflows. SBI Holdings and Startale have been testing settlement and interoperability. The World Federation of Exchanges has raised questions about ownership, custody and market integrity.
5Current Work and Recommendations
FIX published Recommended Practices for Digital Asset Trading in 2022. It currently focuses on supporting a hybrid market model where traditional and tokenised infrastructure coexist. The organisation has released guidance on using its protocol for tokenised assets. However, collaboration between market participants and regulators is needed to limit regulatory arbitrage.
6Need for Regulatory Collaboration
Jim Kaye stated that collaboration between regulators and industry is essential for digital asset ecosystem growth. Gaps in data standards, reconciliation and market processes need to be addressed. Kaye noted that tokenisation business cases are compelling and mature, but lack of standards is hindering adoption.
7Next Steps and Expectations
FIX will continue working on chain-to-chain connectivity, common instrument identifiers and links between exchanges and digital asset platforms. The organisation recommends developing standards for digital asset settlement instructions. Additionally, mapping wallet addresses to legal entities and creating a common taxonomy for corporate actions are needed.
8Significance of Tokenisation for Financial Markets
Tokenisation holds potential for efficiency, transparency and accessibility in financial markets. However, standardisation gaps are preventing this potential from being realised. FIX's work demonstrates that industry-wide collaboration can overcome these barriers. Active regulator participation aims to strike a balance between fostering innovation and maintaining market integrity.