Why pay for a Fix Engine?
It is almost impossible to estimate the size of the FIX Engine market, BUT what we do know is that there is a FIX engine at the heart of the trading infrastructure of just about EVERY investment bank and Investment Manager across the globe.
Even small firms using 3rd party solutions will have a FIX engine at their heart. Should you be using open source software for such an important piece of technology?
A trading infrastructure or FIX engine vendor will of course say you would be better off paying – but given the investment that firms are prepared to put in the rest of their processes – why try and take shortcuts?
Here at RAPID ADDITION we acknowledge that there are open source fix engines, which mean customers can obtain a FIX engine without buying a commercial license. But we believe commercial FIX engines offer benefits over open source FIX engines. We believe there is competitive advantage to be gained with the choice – the risks of not having the best possible FIX engine are immense. The case for ‘Why Buy’ is outlined below and for those of you already using a premium RA Fix engine solution we hope you find this a useful recap on the benefits.
Electronic trading outages
A single outage of an electronic trading environment never ends happily. I’ve been asked a number of times why all outages seem to lose money, when logic dictates that some outages should make money and some should lose.
Unfortunately, the answer is simple; the client gets a free option – if they get a better result due the outage, they keep that result, but if it is a bad outcome they will demand to be compensated.
The losses incurred by a single outage could easily make the cost of a FIX engine look insignificant.
It’s a core part of the infrastructure that just needs to work. So it is wise to spend the time developing the tech where you can really add value and take a march over your competitors.
But as a firm always wanting to ensure we provide value for money and a low total cost of ownership, we sat down together to really quantify the risks.
10 reasons why your competitors see value in a premium FIX Engine
- Latency & Throughput, No GC and Jitter
Whilst it can be argued that not everyone cares about latency – there is latency and then there is latency. The majority of firms actually don’t need latency measured to the sub microsecond level, however businesses that have not invested in the performance aspect of their product run the risk of systematically disadvantaging their clients.
Attention to detail in a firm’s life blood means that eliminating garbage collection and the resultant jitter is considered top of the queue, whilst ensuring the data is still processed efficiently and accurately.
- Quality & Design, Investment & Upgrades
Software takes time and money to develop. Time is needed to plan, design, test and upgrade the software. Licensing gives the vendor the space to do so.
- Resilience and Reliability
This stuff has to work, and work as close to 100% as is possible. When working with an established corporation you have a commercial contract that has obligations, which in turn informs client expectations for the robustness of the software.
- Technology Advancement
Research and Development is a core part of any successful corporate entity – understanding the market, understanding technology trends, and more importantly, having the time and space to know what to do with them.
As providing technology is an ongoing concern, it is in the life blood of a software provider to ensure that the product is kept current and relevant.
- Support & Consulting
So, if you take the risk of ad-hoc support, you may not get timely support when you really need it, such as when a bug brings down your production systems. Furthermore, you are often held to ransom during development when you need to learn how to get the best out of the software.
With a commercial agreement you know where you stand, and can be confident that you will have the support when you need it.
At RAPID ADDITION we understand the importance of High Availability – all of the senior developers have worked on trading desks and fully understand the need for responsive support.
Additionally, if you are in the ‘cash available, time poor’ development situation, a good provider will have access to extra capacity to provide you with the development support you need.
- Flexibility with Custom Protocols
One size does not fit all. Any software needs to be flexible to mould in with your own firm’s custom FIX dialect. It is essential that the product is easy to adapt, and your vendor’s experience will make it very easy to do this quickly.
As an example – the EMX protocol is based on FIX, but it is very highly customised, using not only custom tags, but also a custom cryptographic signing algorithm. A fully supported FIX solution will provide the necessary tools to adapt to such custom requirements, rather than requiring the purchase of additional software.
- Asset Class Coverage and extensions
As the electronic industry has built up over time, more and more asset classes are being traded electronically. A good FIX engine is designed to be asset class agnostic – able to adapt and grow with the markets. One of the main challenges of FIX engine development is adaptability.
- Choice of Platform
In a global environment, it is not impossible to have multiple operating systems and multiple technologies deployed. Keeping your external technology standardised makes sense, so being able to deploy on an array of different technologies is of prime importance.
- Integration and API
At RAPID ADDITION, our API has been designed for ease of implementation, and it provides the flexibility to easily integrate with your in-house systems. Failure to use good quality software may render integration next to impossible, apart from with the simplest of systems.
- Company Resilience – do you want the company to survive to support it?
Even if you can access a support contract for open source software – how can you be sure that the company will still be there next week or next year?
Integrating software into your company that may become unsupportable in the not too distant future is not advisable.
So – Does Opensource Software really have a place in a corporate environment?
We think under some circumstances it does but issues such as support need to be considered. Only open source libraries with large communities, or corporations behind them are likely to be well maintained. Large and serious corporations should consider the implications of using untried and untested software from smaller communities
Whilst there are fantastic examples of industry collaborated open source software, such as Linux and Java (in a way similar to how the FIX protocol itself is a result of collaboration), these initiatives have a huge organisational infrastructure behind them – FIX engines do not.
We are the developers of one of the first commercial FIX engines, and whilst our product offering now extends way beyond just a FIX engine (we provide our clients with a total electronic trading infrastructure) – our high performing, robust, and stable FIX engine remains at its heart.