Core capability or commodity technology.
Why pay for a premium FIX Engine?
Reflecting on how integral FIX protocol has become to electronic trading, it’s interesting to look back at the long journey that has brought us to where we are today. FIX started out as an experiment between Salomon Brothers and Fidelity in the early nineties, during the fledgling days of electronic trading, with the aim of automating the distribution of execution reports and IOI transmissions
Today, FIX is used extensively across the capital markets industry and the protocol supports a much richer set of functionality and workflow.This partly reflects how sophisticated and pervasive electronic trading has become since those pioneering days, but also how FIX has evolved into a compelling industry standard for enabling electronic message exchange.
With FIX adoption resulting in efficiency gains within equity trading, broadening to other asset classes was a naturalevolution. As well as becoming the dominant standard for equities, it is widely used in forex and derivatives, while also seeing increasing adoption in fixed income and institutional crypto currency trading. FIX has become the de facto messaging standard for pre-trade and trade communication, supporting order flow, market data and price dissemination, and increasingly post trade integration as the industry strives for greater automation
However, with up to five versions of FIX and multiple dialects in use across the industry, implementation is not without its challenges. But as electronic trading becomes increasingly ubiquitous and performance focused, FIX is now a business-critical capability for all trading firms. In a competitive market,fast and seamless onboarding (whether it is your client, counterparty, or a liquidity venue),together with the flexibility to adapt to customer needs, are essential features.At the same time, performance and robustness are non-negotiables when it comes to retaining and growing order flow
For such a critical capability that underpins the trading process, we are surprised that the choice of FIX technology sometimes appears to be somewhat of an afterthought–a commodity capability where cost should be minimized.Of course, cost is an important factor in an industry facing margin pressure, but we don’t think such a core component of a firm’s trading technology is the place to settle for second best. It is also potentially a false economy, not only given the important role a FIX engine plays in electronic trading workflow, but also taking into account the wider cost of ownership benefits that a high-quality solution can provide.
So, while acknowledging the low-cost vendor solutions in this space,the availability of open-source offerings, and the temptation for firms to build in-house, below is our view as to why a premium FIX engine technology is a ‘must-have’ not a ‘nice to have’, based on our experience of working with leading capital markets firms over the last two decades. 5 Reasons why your competitors invest in a premium FIX capability
Whilst not all asset classes and workflows need to be ultra-low latency, there is no doubt that performance and performance measurement have grown in importance as electronic trading has become increasingly pervasive. This is driven by both the competitiveness of the industry and the regulatory focus on issues such as best execution.
But performance is about more than just pure speed – headline latency numbers become meaningless if that performance cannot be maintained during critical periods. Jitter and garbage collection (GC) can see latency deteriorate during busy market conditions or result in major spikes, blowing out average latency and making expected performance (benchmarked in sanitised test environments) look misleading at best. The other major determinant of performance is throughput and whether a chosen solution has the ability to scale to meet message rates during unexpected volume peaks or highly volatile market conditions.
The RA FIX Engine is built using Rapid Addition’s proprietary GC and jitter free software. It is optimised to eradicate outliers, ensuring both industry leading latency as well as stable and predictable performance. At the same time, our software, together with advanced multi-threading technology, enables industry leading message throughput and session numbers on a single commodity server. Scalability is one of the key reasons why our software is used by major sell-side firms and liquidity venues.
With five current versions of FIX in common use, not to mention the many extensions and customised implementations, sometimes FIX can feel less of a ‘standard’ than it is made out to be. FIX has bought huge benefits and efficiencies to the industry and has been a key facilitator in the growth of electronic trading, but it is also fair to say that every implementation will have its fair share of complexities.
Any FIX software solution chosen by your firm needs to be flexible enough to adapt to not only your own choice of FIX or custom dialect (to meet specific workflow needs), but often that of your clients or counterparties as well. It is essential that the solution can easily handle any variant of FIX and is quick to configure and adapt, reducing time to market and minimising any potential impact on important client relationships. This will also depend on whether your chosen vendor or in-house team can rapidly provide the support needed to implement required changes, or whether limited resource availability results in frustrating delays to change management and issue resolution.
Supporting all versions of FIX protocol out-of-the-box and providing extensible functionality, the RA FIX Engine can adapt to meet both your current and future business needs. Changes can be quickly implemented by either your inhouse developers or Rapid Addition can provide the professional services support needed to keep your business agile.
Even a single outage within an electronic trading environment can damage hard won customer relationships and impact the bottom line. FIX technology is core infrastructure that essentially underpins your business with clients and counterparties. The losses incurred by a client impacting outage can make the cost of a FIX engine look insignificant, which is why we believe that low cost solutions can be a false economy.
FIX is a core part of your trading infrastructure that just has to work!
Rapid Addition’s core FIX technology has been built on years of experience, longstanding collaboration with FIX Protocol Limited, and the provision of comprehensive electronic trading solutions to some of the biggest names in capital markets. Our technology has performed flawlessly in the face of extreme market volatility, supporting highly liquid asset classes at tier-1 banks. Even if your use case is far simpler, the RA FIX Engine provides you with the peace of mind that your business is being conducted on some of the most reliable technology in our industry.
As discussed previously, FIX infrastructure sits at the heart of trading workflow and is a business-critical component, yet we constantly hear horror stories from customers about the time it takes for their vendor or internal development team to implement changes or identify and respond to service issues. This can be an even bigger problem for firms who have gone down the route of open source software and used consultants or contractors to build and implement their solution. It is important to know what level of product support is provided by your vendor and their SLA targets for responsiveness, as slow response can reflect directly on your client relationships. You must also understand the boundary between support and professional services, i.e. when does support become chargeable, and therefore what is the real cost of ownership of a solution that ostensibly looks low cost when only considering the sticker price. Ultimately you need to know whether you will get support when you really need it and how much it will cost you.
At Rapid Addition we understand the importance of high availability, both with our software design and our customer support. Our senior developers have worked in sell-side trading teams and fully understand the importance of responsiveness. We are transparent about what is included in our support model but have the capacity to provide valueadded professional service resource where needed.
Whatever your use case, it will represent an important cog in your business operations. You need to be confident that your chosen solution has been designed specifically to support electronic trading workflow, that it is constantly being updated and enhanced (including timely addition of new versions of FIX), and it has been benchmarked in multiple use cases within credible financial organisations. FIX vendors who charge subscription fees for their solution are under constant scrutiny from their customers and have to demonstrate their value on a daily basis.
Rapid Addition’s technology is designed specifically for electronic trading, with input from leading global financial institutions. Our FIX Engine is used as a core technology at multiple major sell-side brokers, asset managers and liquidity platforms around the globe across a wide spectrum of workflows. Electronic trading technology innovation is
So… when choosing a FIX engine solution, we understand the temptation to focus on costs –after all, FIX is a small part of a firm’s overall operations and all firms are subject to cost pressure. However, your FIX capability is a critical component of your business, underpinning core electronic trading workflow and connectivity to your clients and counterparties. Poor performance and service issues will have a direct negative impact on your business, both financially and reputationally. For this reason, we continue to believe that financial organisations should invest in technology that will allow their firms to prosper now as well as give them the flexibility to evolve in future. And while price is not necessarily an indicator of quality, your FIX engine is not the best place to compromise given the benefits that a market leading solution and high-quality technical support can bring to your firm.