Forex FIX API helps brokers to offer FIX Trading Accounts to their clients (forex traders).
Liquidity is very essential for the smooth functioning of a forex brokerage business. It helps forex traders to enter and exit the trades in their choice of trading instrument with ease without undue delays in order filling and at low cost.
Much success of a forex brokerage business largely depends on its liquidity or order execution method like A Book, B Book, and C Book.
Execution of traders’ orders via a Forex FIX API is considered to be the best as it’s open, organic, and more like a Direct Market Access mechanism.
Before we proceed further, a disclaimer!
As you would have noticed, we are only explaining FIX API for Forex Brokers here and this article is specifically written for Forex Brokers, Institutions, and other intermediaries that offer any kind of trading services.
Although as an intermediary like Forex Broker or Institution, you need not know technical things about a FIX API but we will explain key things in brief.
What does FIX Stand for?
FIX stands for Financial Information Exchange. It’s a method of communication among financial institutions mainly price quotes, order executions, and filling, etc. Its open-source and public protocol is readily available to financial institutions and developers catering to them to develop FIX API.
FIX Trading Community is the custodian of FIX and manages the FIX Protocol and constantly updates it.
Who invented FIX Protocol?
Robert “Bob” Lamoureux and Chris Morstatt wrote the FIX protocol specifications in the year 1992 to enable electronic communication of equity trading data between Fidelity Investments and Salomon Brothers.
Not so long ago, trading which is essentially buying and selling of securities used to be all manual. There were exchange pits where brokers and dealers would sit and stand all day, shout the bids and asks, and fill their orders.
As you would have easily guessed it was very messy and full of errors and disputes.
This process got a little smoothen with telephone services where brokers-dealers would place and execute orders over the phone. This was slow and still had the scope of errors and lapses.
Large institutions like Fidelity Investments and Salomon Brothers who would place large orders for their clients faced the issues of unfilled orders and latency.
To address this issue, FIX Protocol was conceived by Robert “Bob” Lamoureux and Chris Morstatt.
What is FIX Protocol?
The FIX Protocol is a non-proprietary, free, and open standard system language comprised of a series of messaging specifications used in trade communications, used primarily to broadcast price and trade information among investment banks and broker-dealers.
The FIX Protocol has rules and standards on which different financial institutions, brokers, dealers, other intermediaries, and traders can send and receive price quotes (bids and asks), and different orders (Limits, Markets, etc) along with order filling the information in real-time.
The FIX is an open protocol that any financial institution can use and create its own proprietary FIX API. This is why it’s so popular.
Originally developed to support equities trading in the pre-trade and trade environment, it is now experiencing rapid expansion into the post-trade space, supporting straight-through processing (STP) from indications of interest (IOI) to allocations and confirmations. Additionally, it is witnessing significant growth in the fixed-income, foreign exchange, and listed derivatives markets.
FIX API Trading
As the FIX API gives Direct Market Access to brokers and traders, with extremely low latency and best fills, and great transparency, every trader that knows about it dreams to be getting into FIX API Trading.
FIX API Trading is simply the forex trading method where FIX API is used for trade execution. As soon as the trade is placed for currency pair, it’s directly sent to the market with the FIX API and the order is filled with the best matching counterparty depending on the trade type like Market order, limit order, etc.
How to get FIX API for Forex Brokerage Business?
Since FIX Protocol is open source, anyone can pick the standards and rules, modify them as per their standard and connect with different market makers or liquidity providers who would want to make the market.
2 Types of Forex FIX API for Brokers
When it comes to FIX API for Forex Brokers, there are 2 ways;
I. FIX API developed by Large Forex Brokers
Large Forex Brokerages have created their own Forex FIX API to provide FIX API Trading services to their clients. They can do it as they have large volumes and deep pockets to invest in development.
They offer their FIX API to other forex brokers who either do not have scale or volumes or might not want to spend money and time developing a FIX API of their own.
FIX API providers get deposits, subscription fees, and more volumes that make them more liquid thereby more attractive to traders.
II. FIX API developed by Forex Brokerage Solution Providers
Seeing the high demand for FIX API Trading several Forex Brokerage Solution Providers have developed their own FIX API that they offer to forex brokers who are interested in offering FIX Trading Accounts to their clients.
The FIX API provided by Forex Brokerage Solution Providers costs brokers in deposits, subscription fees, etc.
FIX API Integration
Integrating FIX API into your trading platform requires technical expertise and a sound understanding of the protocol. The integration process involves several steps, including:
Selecting a FIX API provider
The first step in integrating FIX API into your trading platform is to select a FIX API provider. You can either develop your own FIX API or use a third-party provider. Using a third-party provider can save you time and resources and enable you to focus on your core business activities.
Setting up the environment
Once you have selected a FIX API provider, you need to set up the environment for the integration. This involves setting up the necessary hardware, software, and network infrastructure required for the API to function correctly.
Implementing the API
The next step is to implement the API into your trading platform. This involves writing the necessary code to interact with the API, handling messages and data received from the API, and integrating the API with your trading platform’s user interface.
Testing and debugging
After implementing the API, you need to test and debug your integration to ensure that it functions correctly. This involves testing various scenarios, such as connectivity issues, message handling, and data synchronization.
Benefits of FOREX FIX API for Brokers
Here is the list of exceptional benefits forex brokers, dealers, other intermediaries, and their client traders get from an efficient FIX API:
- The highest degree of Transparency
- Lowest Latency
- Highest Liquidity
- Best prices quotes
- Best Order Fills
- Open Source & public
- No manipulation
Things to consider before getting FIX API for your Forex Brokerage Business
As a forex broker, you might be very excited to offer FIX API Trading Services to your clients but before you jump guns and deploy a FIX API, there are a few very important and critical things to consider:
- FIX API subscription requires larger volumes. Usually, the lowest deposit for a FIX API Trading Account is USD 1000
- Most FIX API trades are directly sent to the markets for execution. You must check how they are going to show the information of trades and their positions etc.
- How will the money be transferred for executed trades?
- Do check the Forex FIX API cost structure with the provider like deposits, API subscription charges etc.
- Since FIX API is essentially an A Book method of trade execution, brokers need to ensure they are levying brokerages and other charges to make money, unlike the B Book method where you could wave off most of the charges as you would make money from loss-making traders.
FIX API is the best choice for forex brokers who want to run an A Book Brokerage business.
There is a huge demand for FIX APII Trading accounts among forex traders. They literally despise the B Book brokers.
Using FIX API for order execution get great credibility to forex brokers and adds to their marketing arsenal. Most FIX API brokers literally flaunt that they are offering FIX API Trading and forex traders flock to them.
But if you are a small Forex broker and planning to get a FIX API, you must check with your clients how many of them would want to use it with larger deposits. Run the numbers in an XL sheet and see if with the historical trading volumes would you be able to make money.
If you see getting break-even in the first couple of weeks and the numbers increasing the weeks thereafter, you should give it a try.
All and all, FIX API for FOREX brokers does make perfect sense especially if they are looking for long-term brokerage business.
An efficient Forex FIX API does place a Forex broker into different leagues of Forex Brokers and offering a FIX trading service should be always in your long-term plan.
Wish you great success!
What is FIX API?
FIX API is a specific implementation of the FIX protocol used for forex trading. It provides a standardized messaging system for communication between trading platforms, enabling them to connect and interact with each other.
Why is FIX API crucial for forex brokers?
FIX API is crucial for forex brokers as it provides a reliable and secure connection to liquidity providers, enables them to offer automated trading strategies, and allows them to access real-time market data.
How does FIX API work?
FIX API works by sending messages between trading platforms through a standardized format. These messages contain information about market data, trading requests, and other relevant information necessary for trading.
What are the advantages of using FIX API for forex trading?
The advantages of using FIX API for forex trading include fast and reliable trade execution, support for automated trading strategies, access to real-time market data, and security and reliability.
How do I integrate FIX API into my trading platform?
Integrating FIX API into your trading platform requires selecting a provider, setting up the environment, implementing the API, and testing and debugging your integration.
How does FIX API compare to REST API?
FIX API and REST API differ in several ways, including messaging format, speed and reliability, and ease of integration. FIX API provides a more direct and secure connection to liquidity providers, making it more suitable for high-frequency trading.