FIX – The Mainstay of Electronic Trading Protocols

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Communications on electronic trading platforms are based on well-defined protocols. These protocols are in standardized format for the “Exchange of information” between the systems.

Electronic Exchanges have completely different protocols that they presently expose as their E-Trading interface as below.

  • FIX Order Flow – FIX (FIX4.2, FIX4.4 & FIX5.0)
  • Native Order Flow (SAIL, Pillar, Millennium, OUTCH)
  • Market information (ITCH, FAST)

Although the FIX protocol has significant market share, the exchange specific protocols (also known as “Native” interfaces) have found a robust backing with individuals using low latency trading.

The intended trading messages are shared in a document, XML message, FpML (Financial merchandise mark-up language), etc., between two financial institutions.

Industry Players:

Trading Protocols can be utilized by financial institutions like broker-dealers, exchanges, institutional investors, and others in the industry to communicate among each other.Industry PlayersSome of the benefits of the Electronic Trading protocols can be recited as below.

  • Straight-through processing: Facilitating placing of orders, acknowledgment, confirmation, and all other processes online without much manual intervention. Thus, STP has redoubled the potency and speed of trades globally.
  • Access to real time-market information: It enables the business to achieve a real competitive edge by facilitating the power to access real-time market data. It can help in estimating how the value of your trade will be affected if you hit the market immediately.
  • High performance: Directly connected to the counterparty, it lowers the latency, providing a high output.
  • Connectivity: It provides universal connectivity via encrypted communication channels. Retail traders can trade at the same level as institutional traders.

FIX (Financial Information Exchange) is a highly scalable electronic communication protocol to facilitate the real-time exchange of information related to financial markets. FIX is developing a key role in the post trade area, as over 80% of buy-side companies and over 95% of sell-side companies surveyed currently support FIX for post trade allocations.

The FIX trader community has around 1,10,000+ registered members and 275+ company members, including several large investment banks. Globally, there are 3000+ products and services, provided by 500 suppliers, that cover the market information demand of the financial operators: from real-time instrument prices to reference data.

FIX Architecture:

FIX consists of two layers:

Session layer: The session layer provides high performance. There is sometimes a bi-directional stream of ordered message transfer between two parties; thus, the handshake between those parties, data integrity, message delivery, and sequencing are handled by the session layer.

Application Layer: This deals with business-specific functions like order creation, cancellation, replacement, etc., and it parses the execution reports and subscribes to the market data.

FIX Message components:FIX Message componentsFIX message consists of three main components. The order of those components should be maintained.

Header: The tags included are:

  • 8 – BeginString
  • 35 – MsgType
  • 49 – SenderCompID
  • 56 – TargetCompID
  • 52 – SendingTime

Body: It contains specific session and application message content.

Trailer: It includes only one tag, i.e., Tag10=checksum. The tag10 value is calculated by summing each byte of the message. (excluding the checksum field). This checksum is then changed into a modulo 256 number for transmission and comparison.

Trading systems need to process huge amounts of data in real time, and the accuracy of data is very crucial to avoid huge losses in terms of money and reputation. Trading systems have complex terminology and business rules, and hence, testing has become an important role in the effective delivery and efficient functioning of trading systems.

Key Challenges:

  • Building and maintaining of the domain competency
  • Understanding the business rules and models
  • FIX protocol expertise and exposure on different FIX versions
  • Understanding of complex trading scenarios
  • Testing of Legacy applications is difficult
  • Understanding of regulatory compliance across different regions
  • Other challenges include changes in and the introduction of new products

FIX testing is classified into 2 categories:

Session Layer Testing:

The FIX initiator will open a socket for the FIX acceptor. Once communication has been established, the first FIX message will be a Logon message. The FIX acceptor validates and accepts the Logon message, and then the acceptor will send a Logon message back to the initiator confirming the session started.

If the logon request validation fails, the socket gets terminated. If the Logon request validated successfully, the basic FIX connection will be established, and the exchange of messages can occur.

Testing the Session Layer includes message delivery, message sequencing (inbound and outbound), reset sequence, sequence replay, and duplicate messages whenever required.

Application Layer Testing:

The application layer contains all the business validations. Testing the Application layer includes all the below scenarios.

Business Validation Areas:

  • All types of order types and expiry types: Limit, Market, Stop, Stop-Limit, FOK, IOC etc.
  • Order state handling: New, Partially Filled, Filled, Cancelled, Rejected, Expired etc.
  • Exchange Rules: Order Book rules, Asset class generation rules, Corporate actions, Trading session/states, Circuits Breakers, Delivery Dates on Exchange Contracts, Settlement price, Operation of Member Organizations, Listing and Delisting, Arbitration Rules
  • RFQ, DMA orders and Algo orders:
  • Drop copies and Market Data publishing

The efficiency of testing the protocols can be greatly enhanced by leveraging protocol testing tools such as Simulators, Certification tools, Monitoring suites and so on that greatly help in mimicking counterparties, carryout certification tests, effective session management, etc.


Cigniti has a dedicated pool of FIX testing experts who have hands-on experience with various FIX testing tools as well as protocol validation SMEs. We follow a systematic approach for scenario generation, and we do have a set of customizable test cases and test data that help in reducing the testing time and effort and Hands on experience on a wide array of protocol testing tools

Cigniti offers testing services for applications that include comprehensive validation methods across API testing, functional and non-functional testing, integration testing, security testing, compliance testing, and performance testing, and also includes specialized testing features, such as peer-to-node testing.

Need help? Get in touch with our BFSI Testing experts to learn more about messaging protocols.


  • Chandrashekar has around 10 years of experience in the IT industry working in capital markets and investment banking and has expertise in the derivatives domain and FIX protocol. He is currently working as a Lead Business Analyst with Cigniti's BFSI Practice and Centre of Excellence that focuses on building deep domain competence and developing solutions for the challenges faced by the industry.

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