Enhancing Your Quantitative Trading Success with Our Company
In the fast-paced world of quantitative trading, the need for reliability cannot be overstated. This is where our service comes into play for clients from Interactive Brokers.
Why We Recommend Interactive Brokers
In order to effectively manage multiple orders for various instruments, it is crucial for traders to be able to promptly respond to market activity. This requires a stable and direct connection to minimize the risk of internet disruptions. However, if traders can only handle orders through brokerage companies’ API, they often face limitations imposed by these companies to prevent excessive customer messages and reduce server load. While this may not be an issue during calm market conditions, it can have significant consequences in volatile markets when traders need to quickly respond to market openings, closings, or hedging positions, particularly if they are managing multiple instruments and orders.
Interactive Brokers (IBKR) stands out as the only retail brokerage company that offers clients a cross-connect and FIX with relatively few requirements. Although there is a minimum monthly commission requirement, the benefits and flexibility it provides to traders far outweigh this limitation. That is why we believe IBKR is the ideal solution to offer our clients.
The Importance of Cross Connect
The importance of a stable and reliable connection in trading cannot be overstated. Imagine this scenario: you’re a trader who sends and monitors multiple orders for various instruments. Everything runs smoothly until one day, during a volatile market, your order messages disappear into thin air. You receive no response, and you’re left in the dark about the status of your orders.
This happened to one of our clients. On a day of significant market volatility due to a major economic incident, the client’s program sent a large order but received no confirmation. The order seemed to have vanished, leaving the client uncertain about their position. They reached out to customer service, but due to the market volatility and the influx of similar issues, the response was delayed. Every second of waiting felt like torture as the market prices fluctuated unpredictably.
Fortunately, the client received confirmation within a few minutes that the order messages had never arrived at the brokerage company. But the question remained: when could this happen again? It felt like a ticking bomb with no timer. The client had no control over how their internet service provider routed their packets to the destination, which could take a straightforward path or a detour of thousands of miles.
To mitigate this risk, the client could spend hours or days developing a warning system to track orders and send alerts when something goes wrong. But the effectiveness of such a system is uncertain. After all, there’s a significant difference between known unknowns and unknown unknowns. The client can test the systems based on experience, but no one can be certain about what lies ahead.
This is where cross connect comes into play. Cross connect is a direct, physical connection between two networks in a data center. It provides a stable, high-speed, and low-latency connection, which is essential for executing trades quickly and efficiently. By leasing a server in the NY5 data center from us and sharing a cross connect with other clients, you can ensure a reliable and secure connection to the trading platform. This allows you to execute your trades quickly and efficiently, without worrying about connection issues.
The Importance of FIX
The Financial Information eXchange (FIX) Protocol is a standardized messaging format for financial trading. At Interactive Brokers, traders have the option to use either IBKR’s API or FIX for order submission. However, IBKR’s API has a limitation on the frequency of order messages, currently set at 50 messages per second. This includes not just new order messages, but also modifications and cancellations. In contrast, orders sent through FIX have no specific limits, offering you greater flexibility in designing your trading programs.
Another advantage of adopting FIX is its wide acceptance by other institutions. This means you can easily migrate your programs to another broker or even exchanges if they support FIX. For instance, some foreign exchange brokerage companies allow traders to send messages in FIX. This significantly lowers the barrier for expansion to new exchanges or environments, compared to having to learn a new API each time.
However, there are a few things to note about IBKR’s FIX. It does not support market data and account information, even though FIX can be used for receiving market data. Additionally, to have a FIX session free of charge, a client needs to pay more than $1500 in commissions to IBKR in a month. If this amount is not met, the client will be charged the difference between $1500 and their monthly commission. Nonetheless, this requirement is likely not a hurdle for traders whose scale necessitates the use of FIX.
Summary for IBKR's FIX
Flexibility in Order Messages
Allows for a higher frequency of order submissions compared to the standard limit set by IBKR API.
Standardized Format in Industry
Facilitates easier migration of your trading system to other platforms compared to systems developed using proprietary APIs.
More Professional Support from IBKR
The higher eligibility threshold for FIX results in more accessible and professional support from the IBKR team.
Higher Commission Requirement
$1500 or more commission is needed for having the first FIX session.
Test Environment is More Restrictive
Unlike IB TWS, the test environment for FIX is isolated. There is a separated account for test (called QA environment) and it is a parallel universe with only a few instruments with stale quotes that are generally different from the real environment. This makes verifying program functionality more challenging and heavily reliant on a trader’s judgement and experience.
Integration with IBKR API is Needed for Market Data/Account Information
To access market data and account information, traders typically need to have IB TWS or Gateway turned on. This can add complexity to account configuration and program design.
Why Choose Us?
Our company specializes in bridging customers with Interactive Brokers’ services. We have a deep understanding of the trading environment and the technical intricacies of the FIX protocol and cross connect. This expertise allows us to provide comprehensive support for FIX setup, cross-connect setup, and communication with technical staff, ensuring a smooth onboarding process.