Exclusive Insight: What is FIX API and How Can it Benefit Retail Traders?

The FIX API protocol is widely popular amongst institutional traders, but how can retail clients benefit from its use?

The FIX API communications protocol has recently become available to retail traders via cTrader. The company that is developing the trading platform, Spotware Systems, has enabled access for a wide community of traders to a solution which is typically associated with institutional grade offerings.

With the prohibitive costs associated with FIX API support no longer on the table, Finance Magnates reporters spoke to the company’s Head of Business Development James Glyde about what FIX API is and how it can benefit retail traders.

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What is the FIX API protocol and how has it benefited institutional traders in the industry so far?

The FIX in FIX API stands for Financial Information Exchange. This protocol has been specifically developed for trading financial markets to transfer considerable amounts of data as quickly as possible. Currently it is mainly used by the vast majority of market participants to set up machine-to-machine communication and is in fact very standard in the forex space.

The main advantages of FIX protocol are:
– It is a very light protocol so it allows huge amounts and high frequency of information to be transferred in a very short amount of time
– It was specifically created for financial industry, thereby it has a lot of industry specific features that unites participants, essentially with a standardized language we can all communicate with
– It allows traders with a proprietary system to keep their strategy anonymous to anyone who may have access to their transactions
– Because the protocol is unified across the industry, so it doesn’t take a lot of time to set up a FIX API connection

With the FIX API protocol traders can create proprietary trading systems like black-box algos which are able to receive a lot of information from many different sources and make trading decisions based on this information. Due to the above mentioned advantages of FIX API, it takes them a milliseconds to receive information, analyze it and place the order.

How will retail traders benefit from the FIX API access, what are the aspects of the offering that will get a benefit – execution/pricing/etc?

For the first time ever retail traders can get their hands on a FIX API without meeting typically unattainable requirements from their broker. With FIX API retail traders can be at the same level as institutional traders. They can create their own solutions which will be receiving data from one or many different brokers and can serve as a single trading interface to place orders in several places. This will definitely increase the trading effectiveness, since, for example, there is no need to load the user interface of every platform separately and work with each of them individually.

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Does FIX API capability in a platform impact only algorithmic trading or discretionary as well?

FIX API protocol can be used by any trader who wants to create a 3rd party trading application. It is not necessarily exclusive to algorithmic trading, however this is a common use case.

For example, the user might want to create his own trading hub, with a specific user interface that will not be showing the chart, but instead showing numerical values of symbol prices, recognized patterns or trends along with buy/sell buttons. Using this kind of hub would enable the creation of unique systems only ever seen by a few individuals.

Another example would be if the user wants to create an analytical system that would store prices, track events, analyze movements on the market and provide a specific feed of data that trader needs to make a decision, as opposed to allowing an algorithm to make such decisions.

What do clients need to know before using FIX API?

To start working with FIX API, a general understanding of API’s would be very useful to get the basic concept. Anyone would need to read the FIX API specification on our site where they will find Spotware’s Rules of Engagement. Other than that, it would be required to have a pretty rich understanding of trading to help interpret the Rules of Engagement and what FIX API does.

It would be optimal to host their FIX API robot or tool in Equinix LD5 alongside Spotware’s cTrader servers where most brokers are hosted from, as opposed to at their home or a data center not typically used for hosting financial technology. While these options are fine for development, they are certainly not fine when going live.

Do they need to be technologically savvy in order to use the protocol?

As already mentioned, in order to use FIX protocol traders have to understand the main concept of APIs, what their purpose is and how they are used. Since FIX API is more of a messaging protocol based on financial information the most valuable knowledge is that of trading, in order to actually interpret the information the API is transmitting. Most importantly is the vision which they are going to apply cTrader FIX API to.

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