How Trillions Move in Silence

I'm pretty sure you remember that chaotic scene from The Wolf of Wall Street—Leonardo DiCaprio's Jordan Belfort sitting in a room where brokers are screaming over their phones, the entire trading floor erupting in frantic voices and wild gestures.

That wasn't just Hollywood drama. That was reality. Those traders weren't just shouting for effect—they were booking trades, and this absolute chaos was how financial institutions actually communicated with each other. Every transaction, every order, every deal required a human voice shouting into a phone.

Fast forward to today, and those same trading floors are eerily quiet. So, what changed?

Financial Information eXchange (FIX)

Before 1992, the major mode of communication between financial institutions—think Goldman Sachs, Morgan Stanley, J.P. Morgan—was through telephones. As you could probably guess, this was hugely inefficient. Human error was rampant (imagine mishearing "buy 1,000 shares" as "buy 10,000 shares"), settlement took much longer, and during market volatility, phone lines would jam with desperate traders trying to get through simultaneously.

Recognizing this chaos couldn't continue, two unlikely partners stepped up in 1992: Salomon Brothers and Fidelity Investments. Despite being competitors, they collaborated to develop a standardized language for electronic trading communication—essentially creating a universal translator for Wall Street.

The timing was perfect. As electronic trading exploded in the mid-90s, every major financial institution faced the same problem: their systems couldn't talk to each other. Rather than each firm developing their own proprietary solution, the industry rallied around this open standard. Within a few years, everyone from the New York Stock Exchange to small hedge funds had adopted it.

This standard came to be called the Financial Information eXchange (FIX) protocol, and three decades later, it's more relevant than ever before. Adopted globally, from Indian and European markets all the way to the US—it is quietly powering trillions of dollars in daily trades while most people have never even heard of it.

Technical Overview

FIX is a standard messaging protocol to communicate trading information between buy-side institutions, brokers, and markets. It is flexible in nature—it can handle many different types of financial instruments and transactions.

What makes FIX truly powerful is its independence: it's completely platform-agnostic and vendor-neutral. This means a trading system running on Windows can seamlessly communicate with one running on Linux, and a Bloomberg terminal can talk to a Refinitiv system without any compatibility issues. Unlike proprietary solutions that lock you into one vendor's ecosystem, FIX gives institutions the freedom to choose their technology stack while maintaining universal connectivity.

FIX message structure

Every FIX message includes the following parts:

• Message header: it contains meta-data about the message

• Message body: it contains information specific to the request or response

• Message trailer: it terminates every FIX message

The FIX protocol defines a list of tags. Each tag is associated with a corresponding field. The message structure is then simply a list of tag-value pairs separated by a delimiter.

Note: I have used the ; character as a delimiter in the example above. In reality, the delimiter is a non-printing ASCII character called the SOH character.

FIX order flow

Let's understand the trade lifecycle, and how the orders are placed between two counterparties with the help of an example.

Step 1: Customer A's Order

Customer A (usually an investment manager) wants to sell 1000 units of Vodafone. Through their system, they enter this order request. The order request is routed to a broker who then accepts this request and sends an acknowledgement.

Note: At this point, the order is live but not yet executed

Step 2: Sending an IOI

The broker then proceeds to send an Indication of Interest (IOI) message to all the other customers in its FIX network. An IOI message is used by the broker to indicate potential trading opportunities or liquidity availability.

Step 3: Filter IOIs, Customer B's order

One of the customers is selected for the actual trade. The selection could be based on different allocation methods. Some of them are:

• First-Come-First-Served (Time Priority) - [Most Common]

• Best Price

• Size-Based Allocation

Step 4: Traded, Execution Reports

The final step involves the broker actually filling the order and informing the counterparties regarding the same. After this step, the trade is considered completed.

FIX System Connectivity

Now that we've seen how these different financial institutions communicate using FIX, let's explore in brief how their systems are implemented.

FIX Engines

FIX engines are software components required to establish connections between different trading systems using FIX. Consider them as an implementation of the FIX protocol. Their core functions are:

1. Session Management

• Responsible for establishing and maintaining FIX sessions between counterparties

• Monitoring session health through heartbeat mechanisms

2. Translation

• To handle incoming FIX messages - decrypt, parse, store, and forward them to the business application

• To service outgoing requests from the business application - construct as FIX message, encrypt, store, and send over a FIX session to the counterparty

Large trading firms typically build their own FIX engines to handle their specific requirements. However, there are also some commercial solutions that provide their FIX engines for a fee.

• B2BITS

• FIX8

• OnixS

The FIX trading community

The FIX trading community is the non-profit, industry-driven standards body at the heart of global trading. The FIX protocol is continuously evolving, and the FIX community is responsible for developing and encouraging adoption of the FIX messaging standard.

Their mission statement is as follows:

To improve the global trading process by defining, managing, and promoting an open protocol for real-time, electronic communication between industry participants, while complementing industry standards.

Conclusion

Every day, trillions of dollars flow through global markets in milliseconds. Behind every trade, every order, every market movement lies a protocol most people have never heard of - yet without FIX, the modern financial world would grind to a halt. The next time you check your portfolio or hear market news, remember: there's an invisible language making it all possible.