The FIX protocol has become a standard in the trading industry: each and every LP provides it for its clients. However, the capabilities they offer differ substantially as there are different versions of FIX and different ways of applying it. How does Match-Prime Liquidity compare to other liquidity providers in this aspect? What distinguishes our FIX capabilities from the ones of other LPs?
What is FIX Protocol
FIX stands for Financial Information eXchange. It is an electronic communications protocol initiated in 1992 for the international real-time exchange of information related to securities transactions and markets. The goal of the FIX Trading Community, a non-profit organisation that developed it, was to facilitate data transfer between financial institutions such as stock exchanges, investment banks or fund managers.
The protocol has evolved over time to meet the changing needs of the financial industry. Nowadays, it is used for various asset classes, including equities, fixed income, foreign exchange, and derivatives. Financial institutions rely on it predominantly for its robustness in trading and price feed data transfer. As these aspects are critical to every CFD Broker, they use the protocol to manage a wide range of critical functions, from trade execution to risk management and client communication.
What’s more, this technology links Brokers with their liquidity providers, allowing them to request market data and get an available order book in response or send market orders to hedge their risk exposure.
FIX Protocol in Liquidity Management
As mentioned before, every modern liquidity provider allows Forex Brokers to use FIX. If it is such a common thing, what makes their FIX implementations different from each other?
It is all about the details. First, there are different versions of the FIX protocol, with 4.4 being the most commonly used one, but some liquidity providers still rely on the older, less comprehensive version 4.2. Another difference is how the liquidity provider integrates this technology (actually, this matters even more). While the FIX protocol provides a standard framework, it allows for customisation. Different liquidity providers might implement custom tags or messages to accommodate specific trading strategies, products, or regulatory requirements.
While maintaining full compatibility with the standard version 4.4, our FIX protocol implementation offers access to additional critical financial data, providing Brokers with deeper insights and control. Here’s what they can retrieve:
- balance: real-time access to account balances, providing a clear snapshot of one’s financial standing,
- equity: instant equity calculations reflecting the current value of an account,
- used margin: the margin utilised in open positions, which is crucial for risk management,
- granted credit facility: a preview into the credit extended, enabling better financial planning,
- Free Margin: an insight into the remaining margin available for new trades,
- Profit: real-time profit tracking, which is a vital metric for performance assessment.
Our enhanced FIX protocol not only delivers the usual trade and price feed data but also provides these additional layers of financial information. This comprehensive approach offers our clients a significant competitive edge: by having a more detailed and immediate overview of their financial health and risks, Brokers can make more informed decisions, manage risks better, and identify opportunities more quickly.
Practical Applications of Match-Prime’s FIX Protocol
Our latest FIX specification explains what our clients and bridge providers can do using the full potential of the protocol. Apart from standard procedures, such as how to construct a FIX message to get connected, it contains sections describing additional requests that a Broker could send to us to receive extra information about the current state of their liquidity account or currently open positions (from 6.8 to 6.13).
The tags used for requesting the current state of a client’s hedge account (source: Match-Prime’s FIX specification)
How can Brokers and Bridge Providers use this additional information? Here are a few ideas on how to put this data to work.
FIX Application #1: Hedge Monitoring for Dealers
The first idea is to create a hedge monitor app for dealers to control potential discrepancies between the A-book orders of retail clients vs positions in the hedge account. It is especially important to control them because mistakes in this area may lead to the opposite of our intentions: one can still be at risk when thinking it is hedged and vice versa.
By integrating it with platforms like MT4/MT5, our system can scan for open transactions that are supposed to be hedged and verify their status. This feature is particularly important during significant market events, ensuring that settings and executions are done as intended.
There are multiple situations when such a discrepancy may occur. For example, when a retail account is moved between the A book and B book while having open positions, i.e. their execution was done differently than the current state of the moved account. Another case is when a bridge or MT4/MT5 invokes an incorrect order request to a liquidity provider due to an internal error, which can lead to some out trades. The discrepancies may also be caused by wrongly put bridge settings.
FIX Application #2: Proactive Risk Management Alert
Another way to use the data from one’s Match-Prime liquidity account is to implement a simple alarm that notifies the Broker when essential values such as margin level or free margin get close to critical values (margin call, etc.). It is especially relevant for those who maintain a lower balance in their hedge accounts compared to their A-book client deposits.
Receiving early warnings when these values approach critical thresholds allows Brokers to act proactively to prevent issues like trade rejections. This integration not only helps in efficient risk management but also enhances the professionalism and reliability of the brokerage service.
The tags used for requesting detailed information about a client’s open positions (source: Match-Prime’s FIX specification)
FIX Application #3: Real-time Trade State Requests with Unique Order Identifiers
Last but not least, our enhanced FIX protocol introduces a feature allowing bridges to send requests and receive the current state of open trades with unique identifiers. This capability allows bridges to implement a retail mode for hedge accounts, enabling Brokers to observe and manage individual client trades on a one-to-one basis.
This approach offers unparalleled transparency, allowing Brokers to view and analyse each client’s hedged positions directly rather than rely solely on net exposure data.
Final Thoughts: Elevate the FIX protocol potential
In an industry where speed, accuracy, and information depth can make or break a Broker’s success, our advanced FIX protocol stands as a testament to our commitment to providing superior tools and services to clients. By choosing us as your liquidity provider, you’re not just getting standard data feeds but an enhanced toolkit designed for modern brokerages.
If you want to learn more about our FIX protocol implementation or other technical details related to our liquidity platform, choose the suitable contact form and send us a message. We will be happy to dispel all your doubts!
