FIX Protocol : Pros and Cons

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FIX stands Financial Information Exchange. The protocol is a highly scalable electronic communication protocol to facilitate real time exchange of information related to financial market. It has become the standard method of pre-trade, trade and post-trade communication. Market participants including banks, hedge funds, prime brokers etc, utilise FIX for their own trading means all to connect directly to clients. It is a full-fledged liquidity provider.

FIX is not restricted by any language since it is a protocol.

Pros of FIX

  1. Straight-through processing : The traditional methods of trading involves the order being placed using emails, mobile phones. Thus making the acknowledgment, confirmation and all other processes involved in trading complex. But with the introduction of FIX, we have the facility to make all these processes online without much of manual intervention. Thus, STP has increased the efficiency and speed of trades globally.
  2. Access to real time market data : Industry standard FIX API, allows the business to gain real competitive edge. It by facilitating the ability to access the real-time market data. Both open and close market receive real-time market data. It allows us to see the market depth i.e. how much volume we have on the bid and the ask side, how it is changing thus indicating, how the price of your trade will get affected if you hit the market right now.
  3. Supports for all types of orders and trading interfaces : Any trading interface can be used to connect to any FIX compliant destination. For instance, you are using FIX and you want to use Multicharts, Ninja Trader or any other interface, it is possible to do so.
  4. High performance : This API product helps in providing high performance and saves money and time. Since, we are directly connected to the counter-party, it lowers the latency, thus providing high throughput. Because of FIX API’s versatility, traders can easily trade FIX along side other asset classes by using a single screen. They need not to build their own platform to offer API trading.
  5. Connectivity : It provides universal connectivity via fully encrypted communication channels. Retail traders can trade the same level as institutional traders.

Cons of FIX:

  1. Version issues : There are few standard implementations of FIX. So, whenever the version is upgraded, you need to upgrade to the latest version of the protocol.
  2. Complex System : It is a bit complex system. Since, it is a birectional system between two counter-parties, the handshake mechanism is complex. You need to send the heartbeat otherwise the connection will get dropped.
  3. Expensive : It is expensive. In order to make a trade, there is usually a minimum volume that needs to be satisfied. The quantity and cost of the order for a particular product should be higher than the minimum value specified in order to allow the trade to happen.

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