It is very well known how fragmented the FX market is. There are hundreds of dealing banks, ECNs, non-banks, all of them providing liquidity. Each of them providing unique prices at different tiers, in des-centralized architecture. All these different venues provide access to their feeds, using APIs, and in most of the cases its format it’s quite different from each other. In addition, each FX venue could use different connection protocols and messaging formats (FIX 4.2, FIX 4.4, ITCH/OUTCH, etc)
Moreover, depending on the venue, data feeds could be divided in two groups:
- Request For Quotes (RFQ)
- Request For Streams (RFS)
To add even more complexity, nowadays, traders are asking to also have integrated Cryptocurrencies into their feeds.
The cryptomarket is even more fragmented and the technology that each venue or exchange is using is totally different from what traditional financial industry is used to be. They are using REST/Websocket APIs, and the formats from each exchange is “totally” different.
Here is when the trader needs to have a robust and reliable Liquidity aggregator with the ability to “normalize” all these feeds into one common format.
FX Aggregator will allow you to
- Have a better outlook of the overall market
- Build complex strategies using different assets
- Hedging with complex positions
- Price discovering
- Feed other modules like Risk management, Data Modeling
- Be able to execute your orders at best prices
- Smart execution and order routing
- Avoiding slippages
Conclusion
Forex market, and inter-banking system has grown exponentially in the last decades, and the amount of dealers are increasingly growing. All this gives a tremendous opportunity to traders to find the best prices for a specific asset. The available data is huge, and they need tools to decide which price to take (or make) as soon as that price is available (microseconds).
Traders that are not using FX aggregators are trading blindly.
Ariel Silahian
Keywords: #hft #quants #forex #fx #risk $EURUSD $EURGBP $EURJPY #fintech
