Have you been curious how trading websites pass on critical information about stocks to users? Did you know certain privileged corporate can get all the information faster that you or me? Do you wonder how critical information is and how safe the secrets are guarded – while the stock price goes up or down?
If you are stick reading, here are the basic questions we should answer in the first place:
What are trading protocols?
How do trading protocols work?
What are the popular protocols?
How is it designed?
How does it make sure the latency is low?
How does it make sure the bandwidth used is low?
How does it improve efficiency?
How do certain groups get faster information that general public?
How is security managed?
FIX is Financial Information Exchange
Here is an example of FIX protocol:
8=FIX.4.2 | 9=178 | 35=8 | 49=PHLX | 56=PERS | 52=20071123-05:30:00.000 | 11=ATOMNOCCC9990900 | 20=3 | 150=E | 39=E | 55=MSFT | 167=CS | 54=1 | 38=15 | 40=2 | 44=15 | 58=PHLX EQUITY TESTING | 59=0 | 47=C | 32=0 | 31=0 | 151=15 | 14=0 | 6=0 | 10=128 |
8 (BeginString), 9 (BodyLength), 35 (MsgType), 49 (SenderCompID), 56 (TargetCompID) and 1128 (ApplVerID) followed by actual Body consisting for trade information and trailer with checksum for security.
With these tag value pairs, it can send information it needs to the other end
Refer to above Wiki for diagram.
The problem here is that is uses TCP which might affect its latency.
Hence a very popular protocol called FAST was developed as an enhancement. FAST protocol is used in loads of Exchanges all over the world and is a open source code that is free available.
FIX is used more so with in the company. However FAST is used for ultra fast dissemination of market data.
To know more on FAST