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FX trading for a time remained the domain of private financial institutions and global corporations. Today, with the development of the internet and ultra-fast internet connections the retail forex market has grown exponentially. Now it’s possible to conduct trades in lightening speeds and view data in real-time. Furthermore, trades can be executed regardless of location with the market open 24-hours a day during weekdays. The application of Applied Programming Interfaces for FX trading has also meant that the retail sector can benefit from tight spreads, increased market depth at the order book level and fast executions.

As a result, API trading soon gained in momentum, it was not long before online forex brokerages developed their own proprietary APIs.  The fast-paced nature of forex trading, required API development to incorporate real-time forex price quotations, extremely fast trade executions and order/trade confirmations. A range of FX instruments were needed to be easily selected, and the data presented to be clear.  Familiar protocols also needed to be set to allow other developers to plug-in and customise accordingly.

The advantages of API trading soon became clear, as users could now automate FX trading, steering away from subjective and emotional decisions. In contrast to manual trading – where decisions are often fuelled by emotive and speculative decisions. The use of APIs in FX trading also allowed for collaborative development, allowing other FX brokerages or Exchanges to push the boundaries and improve upon existing APIs.

In a world where milliseconds matter, it became essential that users could benefit from ultra-fast executions. Therefore, in order to improve execution speeds, latency levels had to be reduced and “mechanical sympathy” had to be a strong architectural element in the APIs. APIs, historically, have been designed to incorporate direct access to market data, functionality to view orders and positions, access to real-time market data, and the ability to execute trades in the quickest time possible.[1]

Another important architectural element of the design developers had to bear in mind for their APIs, as previously highlighted, was ease of use for other developers, to synchronise with the API. Therefore, it was essential that other developers could easily connect with the API via traditional protocols such as FIX, Java, .NET etc. Other developers, using the API, could immediately start using the programming language with which they are most proficient.

API trading continues to evolve according to the requirements of market participants. There is a clear advantage over manual trading, as emotions are not influencing decisions made. Furthermore, the user benefits from lightning-fast executions as well as a plethora of other customisable features. However, in the world of FX trading, where milliseconds count; it is undeniable that an API boasting ultra-fast executions has a great deal of appeal.

Article written on behalf of LMAX . *LMAX® is a Multi-Lateral Trading Facility (“MTF”) as defined in the Markets in Financial Instruments Directive (“MiFID”). LMAX, LMAX Trader and ‘Make Your Own Market’ are trademarks of LMAX Limited..

FX and CFDs are leveraged products that can result in losses exceeding your deposit.  They are not suitable for everyone so please ensure you fully understand the risks involved.  The information in this article is not directed at residents of the United States of America or any other jurisdiction where trading in CFDs and/or FX is restricted or prohibited by local laws or regulations.

LMAX operates a multilateral trading facility.  Authorised and regulated by the Financial Services Authority (firm registration number 509778) and is registered in England and Wales (number 06505809). Our registered address is Yellow Building, 1A Nicholas Road, London, W11 4AN.