Why Always use your own Forex Liquidity Aggregator
Traders that are not using FX aggregators are trading blindly.
It is very well-known how fragmented the FX market is. There are hundreds of dealing banks, ECNs, and non-banks, all of them providing liquidity. Each of them provides unique prices at different tiers, in de-centralized architecture. All these different venues provide access to their feeds, using APIs, and in most cases their pricing format it’s quite different from each other. In addition, each FX venue could use different connection protocols and messaging formats and protocols (FIX 4.2, FIX 4.4, ITCH/OUTCH, FAST, etc)
Moreover, depending on the venue, data feeds could be divided into 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 crypto market is even more fragmented and the technology that each venue or exchange is using is totally different from what the traditional financial industry used to be. They are using REST/Websocket APIs, and each exchange's formats are “totally” different.
Here is when the trader needs to have a robust and reliable Liquidity aggregator that can “normalize” all these feeds into one common format.
FX Aggregator will allow you to
- Have a better outlook on 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 the best prices
- Smart execution and order routing
- Avoiding slippages
Tools you can use
We have been working for years in this space and helping funds to build their own tools.
I strongly recommend our latest addition, our open-source project (100% free to use) VisualHFT. It is a GUI for enterprise-level high-frequency trading systems, making a focus on visualizing market microstructure analytics, such as Limit Order Book dynamic, latencies, execution quality, and other analytics.
Also, I strongly recommend reading some of my other articles related to this subject:
- TOP 5 reasons why you need an FX aggregator
- How technology and automation can help to improve Execution Quality in FX (source code included)
Conclusion
The forex market and inter-banking system have grown exponentially in the last decades, and the number of dealers is 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
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