What Is a FIX API, and How Can You Use It in Trading?
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The advancement of technology reshaped the way financial trading works, where today’s trading platforms are equipped with a sophisticated structure of integrations, systems, software and data exchanges.
APIs are crucial in building trading software because they power data exchange with markets, servers and information systems. Therefore, some APIs are more predominant than others, expanding the trader’s capabilities and trading options.
Today, we will discuss FIX API as one of the most commonly used data exchange systems that power trading in several markets. How do these APIs work? Let’s explore.
Key Takeaways
FIX APIs are messaging protocols that allow traders and brokers to exchange data with market servers.
Financial information exchange APIs create data exchange channels with markets to establish bidirectional timely transfer of data such as market prices, liquidity and volume.
FIX APIs work on several markets and provide three types of data: pre-trade, trade and post-trade data.
Understanding FIX API
APIs refer to application programming interfaces, software and systems that connect service providers and facilitate data exchange between two servers to provide various information.
FIX protocol is a financial information exchange API which is commonly used in trading and exchange platforms to exchange market information and data with real-life updates.
Using FIX APIs allows users and traders to stay ahead and informed about market prices and movements, besides getting live updates on market events.
Many trading platforms, brokerage firms, liquidity partners and service providers use FIX API protocols to provide updated rates and issue data exchange with their clients, providing open messaging channels and seamless information flow.
Many assume that FIX is an exclusive API for forex trading. However, these APIs can be used in a wide range of instruments, including stocks, precious metals, energy sources, bonds, and cryptocurrencies, and they support equities trading.
FIX protocols are characterised by convenience and high speed. FIX API trading protocol communicates and represents data in an easily understandable manner and has low latency rates that can be as low as one millisecond.
FIX protocol became widespread in light of heavy reliance on the electronic communications protocol and the digitalisation of services, making them inevitable for launching a successful business in the financial sector.
Why Use FIX API?
Traders use FIX API to interact with financial markets without going through trading software like MetaTrader or cTrader. Therefore, users can directly receive market prices and execute different market orders at the best conditions, such as low slippage and delays.
FIX messaging protocol is an open-source platform which does not require registration fees, which makes it easily applicable and accessible compared to other APIs.
Moreover, financial information exchange - FIX - supports different programming languages, making it easier for developers to interact and request data exchange using Java or others.
FIXs are used in various markets, which makes them scalable and suitable for different types of traders. Also, directly connecting with the exchange or market servers ensures you receive market news and price action timely without a third-party website or broker.
Types of Data Exchange Using FIX Protocol
Traders who use FIX APIs enjoy the flexibility and ease of using these applications, and they support exchanging different types of data.
Pre-Trade Data
Some traders benefit from the market insights they receive from pre-trade FIX API. This type of information includes market statistics like liquidity levels, volume and order flow. Investors use these insights to create their trading strategies and prepare for regular trading hours.
Trade Data
Trade information includes market updates about order execution, slippage rate, market vs actual price and actual trading account data. Exchanging trade data may also involve leveraged and margin trading with detailed insights flowing through the market servers.
Post-Trade Data
Post-trade FIX data involves recording, processing and issuing settlements for executed trades, which help the trader calculate their equity and issue different financial statements like profit and loss, balance sheet and liabilities. This information also includes traded asset ownership transfer and finalising settlement cycles wherever applicable.
How is Financial Information Exchange API Used?
The history of FIX API goes back to 1992 when it was created by the FIX trading community as the catalyst for platform digitalisation. Earlier, brokers and traders used telephone connections to communicate market updates and execute traders, which was slow and inefficient.
FIX Protocol LTD developed FIX APIs to facilitate the revolutionary transition to trading over electronic systems and platforms. Therefore, these applications play a major role in the Forex market.
Fast Fact
FIX APIs were initially created to replace phone trading, commonly used for equity trading. However, this protocol was quickly adopted in almost all financial markets.
FIX APIs are more of a messaging standard than a classic application programming interface because they are primarily used to exchange information. Traders access FIX API trading to exchange securities through buying and selling activities facilitated by the FIX’s server-to-server system.
These APIs aid in receiving and providing liquidity by financial corporations, banks, prime brokers and institutional investors. Trading platforms, asset management firms and hedge funds use the FIX API to communicate and execute market orders conveniently. These applications can also be used for market aggregation and consolidating data from several order books.
Traditionally, market participants interact through multiple brokers that offer trading software, such as MetaTrader and cTrader. However, FIX APIs help you establish a direct connection with the market’s server.
FIX API vs REST API
REST API is another commonly used protocol to interact with financial markets and exchange information promptly and efficiently. Platforms that use REST (Representational State Transfer) are broader than FIX and can be used to exchange data with any server.
RESTful APIs are software development environments that exchange and represent data in a sophisticated way, while FIX APIs are exclusively used for trading and mainly foreign exchange markets.
Moreover, RESTful APIs use a pull mechanism, where they request data and receive them to finalise the exchange. On the other hand, FIX APIs use a push mechanism because they establish a bidirectional connection with the server and receive information as part of the data flow of the FIX session and not through one-by-one requests.
Advantages of Using FIX API
FIX APIs have been around for many years, which justifies their utility and the benefits you can find by using them, such as.
High speed: the size of FIX messages is small, requiring less space from the bandwidth, which speeds up the process.
Easy to establish: FIX API access is easy, and users can establish an uninterrupted FIX connection with the market server.
Scalability: FIX APIs can be used for several brokers, market makers, and financial institutions and serve various market needs.
Security: FIX protocol connections are anonymous, which preserves your identity and helps you to communicate directly with the market.
High frequency: FIX APIs help you establish a large bandwidth to exchange big data at high frequency at low latency seamlessly.
Challenges of Using FIX API
Despite the several advantages of FIX protocol, there are some downsides to using them, such as.
Only real-time data: FIX APIs allow you to acquire real-time market information only, and you cannot inquire about receiving specific date’s data or historical market info.
Query limitation: trade-related data are limited with FIX APIs, and you cannot request specific account data like equity, balance, active order or available leverage.
Conclusion
FIX (financial information exchange) APIs are data exchange and messaging protocols that are used to interact with the direct market’s server. These applications allow traders, brokers and large corporations like banks and hedge funds to communicate and receive data from the market directly without third-party software or brokers.
These protocols facilitate direct order execution and liquidity provision to markets, which makes them highly important for stability and growth. FIX APIs establish a direct connection with a designated market server, where investors can execute various market orders easily and at a higher speed.
