30 Jan Barriers To Keep In Mind While Improving Execution Quality In FIX
Efforts are being constantly made in the world of trading to improve the overall trade quality.In fact, it is important to keep in mind that pricing is not at all a normalized notion in FIX. The price range will vary and customers across the globe will experience that in due course of time. The prices are usually based on trading styles, margins and the risks involved. There have been an increasing number of corporate clients who are trying to analyze the execution quality. This is mainly done to reduce the trading costs of the foreign currency.
Latency Affects Clients and Market Makers – Latency negatively affects both the clients and the market makers. In the case of clients, latency can go on to affect the prices to become outdated. This obviously results in orders that go against the prices and are no longer considered valid. In the case of the market maker, the latency creates an even bigger impact. That is because in case the prices reaching the market maker are not at par with microsecond then the ability to publish prices and to hedge the incoming orders will get compromised. In case the downstream prices feed experience latency, then customers start acting on prices those are no longer a proper representation of the market.
High-Frequency Trading Affects the Market – High-frequency traders make it extremely harmful for the liquidity providers in the market. The high-frequency traders use the latency strategies in order to pick the slower market makers. They have the tendency to create substantial risk for the banks when they tend to sweep the market while removing the quoted liquidity. This is done not only in banks but also in the primary markets because that is where the banks are assumed to lay off the risks.
Aggregation Affects Results– If you see from the buyer’s side and the 2 tier sell side, aggregation often creates a big difference while improving the liquidity and the pricing. But this can also be considered as a way for trade organizations to shoot themselves right in the foot. The managed connectivity services along with the FIX marketplace are considered to be a web of intermingled liquidity.
These are some of the common technical issues that have the potential to affect the execution quality so, make sure that these concerns are properly addressed. FIX till date remains a completely relationship-centered business so the people involved in this work play a pivotal role. If we see from the perspective of the liquidity provider then quality and the quantity are the key elements that need proper focus. Clients are given a lot of importance as long as they provide a good flow of work and fair profit.