Institutional Trading Platforms and the Challenges of the FIX Protocol

Elvin Mootoosamy February 20, 2023

The institutional trading industry relies heavily on electronic trading platforms to execute trades and manage risk. One of the most widely used messaging standards for these platforms is the FIX (Financial Information eXchange) protocol, which has been in use for over two decades. While FIX protocol has served the industry well, it has also led to several challenges, particularly around the shortage of IT/technical skillset in the FIX protocol domain.

One of the main challenges with FIX protocol is that it requires specialised technical skills and expertise to develop and maintain trading platforms. This has led to a shortage of skilled developers in the industry, particularly in smaller firms that may not have the resources to attract and retain top talent. As a result, many firms are competing for a limited pool of talent, driving up salaries and making it difficult for smaller firms to remain competitive.

Another challenge with FIX protocol is that it has led to a lack of diversity in the industry, as the high demand for FIX expertise has created a predominantly male, white, and Asian workforce. This lack of diversity has led to concerns about the industry’s ability to attract and retain talent from underrepresented groups, and may also have broader implications for the industry’s ability to innovate and adapt to changing market conditions.

To address these challenges, firms are increasingly investing in training and development programs to upskill their existing workforce, and to attract and retain new talent. It would also be good to see some of the larger firms partnering with universities and educational institutions, to develop specialised courses and programs in the FIX protocol domain. In addition, there has been a trend towards using API connections in addition to, or instead of, the FIX protocol in the institutional trading industry. APIs offer several advantages over FIX, including greater flexibility and ease of use, real-time data exchange, and advanced features like machine learning and artificial intelligence. APIs can be accessed through common programming languages like Python and JavaScript, making it easier to develop and maintain trading platforms and integrate with third-party applications.

Despite these challenges, FIX protocol remains a critical messaging standard in the institutional trading industry, particularly for high-speed trading and for connecting to exchanges that only support FIX.

Recogitate are able to offer both FIX and API expertise to help institutional firms with the new build out or maintenance of their trading platform, and can work with companies to determine the most appropriate messaging standard based on their specific needs and requirements.

In conclusion, the institutional trading industry faces several challenges related to the shortage of IT/technical skillset in the FIX protocol domain. While firms are investing in training and development programs to upskill their workforce and attract new talent, the industry will likely continue to face these challenges for the foreseeable future. However, by adopting a more inclusive and diverse approach to recruitment and training, and by leveraging new technologies like APIs, the industry can help address these challenges and pave the way for a more innovative and sustainable future.

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