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How Financial Information eXchange Can FIX the Crypto Market

08/03/2020

Although crypto is undoubtedly innovative in nature, the majority of crypto exchanges are dragging behind, unable to fully realize the great possibilities of modern trading protocols. Many crypto exchanges are run digitally, yet are not all using the right protocols, causing systems and platforms to lag, offering slower fill times, higher latency, and more bottlenecks. However, some of the more advanced platforms such as eToroX, eToro’s professional crypto exchange, have focused their attention on using the correct protocols for API trading, which is where the difference lies.

APIs as they apply to cryptocurrency trading

An application programming interface (API) is an interface with the task of defining how it communicates with various software programs. Think of an API as a connector between software; its job to coordinate the interactions between various computing interfaces. In terms of trading platforms, APIs work to make smooth, streamlined, and fast connections between traders and brokers and liquidity providers, improving processes, and making the system more efficient. On exchanges, APIs can enhance the speed of trading, boosting the effectiveness of automated strategies and algo trading.

Having already proved itself a keystone in transforming the larger financial industry, the potential for APIs in the crypto industry is great. However, it is currently more barrier than booster, inhibiting institutional cryptocurrency trading, and even more devastating, potentially opening a door to possible security breaches and hacking.

A look at where we are today

The majority of cryptocurrency exchanges use two API protocols: REST and WebSocket, which both possess advantages and powerful features, yet haven’t gained widespread adoption in the broader world of finance. Because of this, crypto exchanges are likely to have a more complicated time communicating with Wall Street and other traditional exchanges around the world.

REST APIs are built to facilitate the communication of brokers and traders based on request-response sequences. This type of API, however, can cause backups on servers, especially when demand is great, making them less reliable for high-volume institutional-grade trading exchange platforms than other APIs.

WebSocket APIs work differently to REST APIs. They have an asynchronous structure, for smooth performance when volume is high. While they are popular and work well when streaming market info in real time, they can suffer from security holes, which may let in hackers and allow for other security breaches.

A Better API: Financial Information eXchange (FIX)

FIX (Financial Information eXchange) was designed for finance. Free, open source, and created for use in the stock market, FIX is today’s de facto API protocol. It is used across the financial industry from Wall Street to foreign exchange markets and investment banks, providing a link for the transfer of information.

The FIX trading community is large, with members – including industry leaders Goldman Sachs, Barclays, J.P. Morgan and CME, contributing to the growth of the protocol and pushing adoption.

It’s easy to promote FIX as the protocol of choice for all types of trading markets because of its ample benefits including access to liquidity, where traders can aggregate orders, accessing institutional-grade liquidity providers for smoother order fulfillment and less slippage; low latency, with robustness to handle 100,000 orders per second for faster processing times demanded by institutional-level trading; privacy and security brought about by years of research and the support of the FIX Cybersecurity Working Group; and smart order routing (SOR), a method to reduce liquidity fragmentation by seeking access to exchanges offering superior market conditions including the optimal execution path at the time of ordering.

Benefits to institutional-level traders

It is remarkable that innovative crypto trading exchanges have remained immune to the charms of FIX API, with benefits galore suitable for institutional-grade trading platforms. Continuing to stand outside the elite group of industry leaders that rely on FIX, most cryptocurrency exchanges remain separate – and unable to offer customers the fast processing and ability to link quickly and smoothly to vital liquidity providers.

Standout crypto exchange eToroX has moved way beyond the pack, by implementing FIX API protocol to provide its customers with the services, speed, and robustness institutional-grade traders are accustomed to on traditional exchanges. With its advantages, FIX API allows eToroX to gives its users – high-volume institutional traders as well as algorithmic traders better liquidity, faster order execution and greater stability while letting traditional asset traders the opportunity to discover and benefit from trading in the cryptocurrency market.