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Are you sending and receiving all electronic trade communications? – The perils of assumption

25th Feb 2016

Operating an element management system to check your FIX engines are up and running is one thing, but knowing for sure they’re actually sending and receiving all the messages, you assume are being communicated, is something else entirely.

Many FX brokers operate element management systems of one type or another. These systems check firstly is the server up? And if the answer’s yes, is the FIX gateway service alive?

Being assured of this information is important, however it doesn’t necessarily guarantee these systems are sending or receiving all of the information you’d hope and expect if your business is to make the money it intends. Especially if your systems happen to be co-located or if nobody’s physically sitting next to the machines or monitoring the data coming out.

The only way you can ensure they’re behaving as imagined is to monitor what’s happening from a consumer’s point-of-view. In many situations, that consumer is the FIX engine whose job it is to create and parse incoming and outgoing trading messages.

The type of communications going into a FIX engine in an FX trading environment might be prices from liquidity providers, or client orders you want to forward on – and there are risks associated with not effectively parsing either.

From a prices perspective, if your pricing engine is forming spreads based on inputs and those inputs stall, the spreads being pushed out won’t change. So you might be offering a price that effectively puts you at a disadvantage as somebody consuming your prices knows the market’s moved on. By either buying or selling off you and then buying or selling back to you, a couple of seconds later, they’ve made their profit at a cost to you. All because they’ve seen a price move, you haven’t. Also, not receiving all client orders isn’t a position most brokers want to be in either, as ultimately it could present a missed opportunity. In both situations, the result is the same – your firm is unnecessarily losing money.

However, if you know you usually receive a particular number of orders from a client or that you usually have a certain number of FIX connections live with clients and liquidity providers, and today is different, it can be a prompt to go and investigate why? These differences might be subtle. It could be that your servers are up, the systems are up and all of your FIX connections alive, but something’s wrong and the profile of the data being received isn’t quite right. It might be that you’re not receiving all of the individual instruments you normally receive, or that the prices coming in are not quite what you’d expect. Conversely, it might be that something isn’t normal with the communications being sent out.

There may be all manner of reasons why you are not receiving or sending orders or prices, but knowing something isn’t quite right means you can act on it. If there’s a systematic reason, you might want to alert your client that there’s a problem or alert your systems team to look at the problem. If it’s a human reason, you might want to get on the phone and speak with your client to find out if there’s a reason why they’re not placing the same level of business as they normally do with your firm today.

However, for this information to be really effective you need to be able to detect a discrepancy in real-time, not a couple of hours after the event – an hour or even half an hour later is just too late.

If you know in real-time you can start to investigate the problem and take corrective action within a matter of seconds. Rather than have to wait and find out because you get a call from your venue or client, or because you suddenly notice your margin positions on intra-day reports are slightly askew.

New monitoring techniques, like those offered by Velocimetrics are able to detect and alert users that something is amiss down to the individual stream, instrument and price level in real-time. Enabling brokers to keep their fingers on the pulse, safe in the knowledge they will be instantly notified if they’re not receiving or sending all client, or liquidity provider information, they expect to be. Ultimately, delivering the real-time, actionable insight necessary to rapidly curtail loss-making behaviour.

If you would like to find out how Velocimetrics could help your firm really assess the health of trading communications being sent and received please take a look at our FX Gateway Health Assessment offerings.

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