Security and liquidity can be burdensome concepts to have in mind when carrying out trading activities, especially for less knowledgeable retail investors. Understanding the way actors are interlinked within the digital asset exchanges realm is a yet more complex -and a priori less urgent- matter that should also be considered. In traditional trading environments, trading happens either through a centralized party (exchange) or between parties (OTC). We will explore the way these actors connect with each other on a more technical and practical level by taking a look at FIX, WebSocket APIs and REST.
Understanding connectivity and data communication
Similarly to how computers communicate with each other utilizing TCP/IP, digital asset exchanges need a way to connect every actor in the ecosystem. As we have developed in earlier articles, digital asset exchanges provide trading through bridging several actor needs: retail traders, institutional investors, brokers, and more. They accomplish this by creating centralized order-books with aggregated trading orders from the aforementioned actors. In order to do this, they need a way of sending and receiving information on the object of trading: assets and their financial information.
The way applications and software programs -and not computers in general- communicate with each other includes APIs.
“An application programming interface (API) is a connection between computers or between computer programs. It is a type of software interface, offering a service to other pieces of software. A document or standard that describes how to build such a connection or interface is called an API specification. A computer system that meets this standard is said to implement or expose an API. The term API may refer either to the specification or to the implementation” [1].
The majority of cryptocurrency exchanges use two mainstream API protocols: REST and WebSocket. Both possess advantages and powerful features, yet they haven’t gained widespread adoption in the broader world of finance. Because of this, cryptocurrency exchanges are likely to have a more complicated time communicating with Wall Street and other traditional exchanges around the world [2].
REST and WebSocket APIs
REST
While APIs allow programs to talk to each other, REST APIs determine how a specific API looks like. REST stands for representational state transfer, and comprise a set of rules that developers follow when they create their API -commonly known as their architectural style. REST are request-response types of APIs, where users send requests (get or post) and receive one-time responses. However, REST APIs can cause backups on servers. This makes them less reliable for high-volume institutional-grade trading exchange platforms compared to other APIs.
WebSocket
WebSocket represents a standard when it comes to both way communication between client and server. While REST are request response APIs, WebSocket handles the “push notifications” side of things, like market data.
Financial Information eXchange (FIX) APIs
While both WebSocket APIs and REST have several use cases, FIX provides a comprehensive solution that is particular to trading of digital financial assets. FIX is the connectivity protocol specifically designed for global financial markets. Across the financial industry, from Wall Street to foreign exchange markets and investment banks, it provides a link for the transfer of information.
FIX addresses one main challenge present when utilizing REST and WebSocket -the necessary conjugation of APIs. Currently, both WebSocket and REST must be used concurrently with web APIs to achieve the type of communication needed for trading activities. FIX opens a constant TCP connection which allows the parties to exchange both types of message. A FIX engine handles this automatically.
FIXing your digital asset exchange – Scalable Solutions
Scalable is one of the few to support the FIX protocol – standard in global financial markets, but unusual in the digital assets sector. It allows established financial institutions to integrate trading algorithms designed for traditional markets seamlessly into the world of digital assets.
Transaction data generated on our platform is highly valuable to all market participants. We constantly strive to improve our connectivity interfaces and offer only the most advanced API protocols. The less-efficient REST and WS interfaces are far more common than their superior FIX and Binary counterparts. However, platforms supporting FIX protocols have significant advantages. As the digital asset industry matures, pressure to offer support for them will intensify.
The Scalable platform also supports FIX protocol 4.2 (standard in US equities today), 4.4 and 5.0 for MD feeds and managing orders. These battle-tested protocols are optimized for minimum latency.
Get in touch with us and learn how you can set up a white-label digital asset exchange, or adapt your already established one to the new industry-flagship communication technologies.
References
[1] “API.” Wikipedia, 5 Aug. 2021, en.wikipedia.org/wiki/API.
[2] “How Financial Information Exchange Can Fix the Crypto Market.” NewsBTC, 3 Aug. 2020, www.newsbtc.com/etoro/how-financial-information-exchange-can-fix-the-crypto-market/.
Sources
Gulko, Serg. Rest/Ws vs Fix for Crypto Trading. Medium, 19 Mar. 2019, medium.com/@serg.gulko/rest-ws-vs-fix-for-crypto-trading-7074c135d756.
Lees, Chris. “What’s the Difference between Fix and Rest Apis?” Fixspec, 24 May 2021, fixspec.com/whats-the-difference-between-fix-and-rest-apis/.
