FIX Consulting – Why every trader and broker needs a health-check

Elvin Mootoosamy November 24, 2022

FIX is the acronym for Financial Information Exchange. It’s the protocol used to communicate financial data – specifically for electronic trading or trading of stocks/securities. The FIX Protocol is the electronic language used to transmit trades. Examples include –

  • a buy order of 100 IBM shares
  • a check on the status of that IBM order
  • cancelling the order
  • rejecting the order

FIX is also used for –

  • Market data distribution
  • Order routing

In short, almost every single kind of securities trading-related transaction message is communicated using the FIX protocol.

Who uses FIX?

Brokers, traders, exchanges – they all use FIX. It’s the communication standard for all securities firms. Without it, communication between each other would be impossible.

The protocol is specified in a document known as the FIX Specification. This document supports finance professionals in understanding and using FIX to the best of its capabilities.

Why every trading business needs FIX Consulting

FIX is great … but only as great as the people who implement it. Would you keep running your car without giving it a regular health check? By working with a FIX consultancy , you can relax in the knowledge you’re your systems are running exactly as they should be.

Only you know the financial cost of system failure. You need to be 100% confident that you’re using the FIX Protocol in a way that aligns with your trading processes. You owe it to your business be sure that everything is running smoothly and correctly.

Read on to find out more about FIX Consulting.

FIX Consultancy – overseeing buy/sell side FIX systems

Your FIX Consultant will support you in many ways – playing a vital supportive role in several ways across several elements of the buy/sell side processes.

  1. You need your FIX engine to be working to your benefit to the absolute max. You need to do whatever you can to minimise price risk and take advantage of arbitrage opportunities. Effective as they are, FIX engines can be complex. It’s important to understand how they work before using them.
  2. Your Execution management system, or EMS – used to display market data and provide seamless, quick access to trading destinations for the purpose of transacting orders.
  3. An Order Management system (OMS) – supporting all the stages in your company’s sales process — from order creation through delivery and even returns.
  4. Helping you to decide between a proprietary (custom built) OMS/EMS platform, as opposed to an off-the-shelf vendor OMS/EMS platform. Each might have its advantages, depending on your transactional needs.
  5. Looking at the different FIX vendors for OMS and EMS. What are the pros and cons of the different FIX vendors, such as Tora, Real-tick, TradingScreens, Fidessa and ITG Triton?

Broker Capabilities – sell side

An effective FIX Consultancy will help with –

FIX Routing of:

  • High Touch trading – Single stock (SS) and Portfolio Trading (PT)
  • Low Touch trading – DMA (Direct Market Access), HVDMA (High Volume Direct Market Access) and algorithms
  • DMA with SOR (Smart Order Routing)
  • Off-the-shelf algorithms with SOR capability. Examples include VWAP, TWAP, POV and Market on Close
  • Algo customisation – add your own parameters

Trading automation

Your FIX consultant will support you in implementing and maintaining all aspects of trading automation, specifically  –

  • Low touch execution (DMA and Algorithmic trading implementation)
  • Low latency execution – sub-millisecond execution (HVDMA)
  • Cost advantages – i.e. low touch being cheaper than other execution methods
  • Available broker strategies
  • Different proprietary (custom-built) strategies
  • Access to dark pools and SI (Systematic Internalisers)

FIX infrastructure – exchanges

The infrastructure of your FIX Exchanges is critical. Your FIX consultant will support you in areas such as –

  • Low latency: Co-location – i.e. your systems sits next to exchange hardware.
  • Exchange fragmentation – Primary vs Lit MTF vs Dark MTF (i.e. making available many of the exchanges in UK/Europe to buy shares from.
  • SOR – selecting the exchange with the best liquidity and price.

Resiliency – Failover

Your systems must be resilient. Otherwise, the cost to your business could be considerable. Your FIX consultant will provide support in

  • Assessing the risk of system failure
  • Identifying single points of failure
  • Ensuring that adequate standby servers or computers are in place
  • Making sure you have Industry standard certification
  • Analysing inter-system dependencies, database integration and messaging layers

Can you afford not to take on FIX Consultancy?

FIX Consultancy could prove to be the last and most critical piece in your trading business jigsaw. By taking on a consultancy service, you’ll be avoiding potentially catastrophic issues.

Whatever stage your business is at, call us for an initial, no-obligation initial consultation. We’re here to help you and support you to ensure that the FIX protocol is working at its best.