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Integration of a broker API: a complete business guide

12/05/2023
(14 min)
Yuliya Nenadovich
Business Development Manager

According to the research company IMARC Group, the global algorithmic trading market volume reached $14 billion in 2022. Analysts predict this figure will be exceeded twice by 2028, as the market will demonstrate an average annual growth rate of at least 12% over the next 5 years.

Forecasts published on GlobeNewswire are even more optimistic. Based on data from marketing company Acumen Research and Consulting, the resource experts predict an average annual market growth rate of 12.9%, which would increase the market to $41.9 billion by 2030.

Algorithmic Trading Market 2018-2030
Fig.1. Forecast of algorithmic trading market growth until 2030. Source: Globenewswire

This trend is facilitated by the development of advanced technologies, including brokers with API for automated transactions.

Do you want to be in the trend and occupy your niche in this rapidly developing sphere? Then you need to understand how to integrate trading APIs and make the most of your digital solution. 

In this article, we’ll discuss a broker API and how to integrate it into your software. We’ll also look at the most popular trader APIs and discuss the practicality of custom trading platform development.

 

Broker API: the essence of the concept and its main feature

An Application Programming Interface, or API, is part of a software product that allows the trader’s interface to interact with the server part of the brokerage platform. Brokers that work based on this technology are called broker API

Such digital solutions can ensure secure communication between your clients and your broker, thanks to strong data encryption. This means they are suitable for various operations, including executing trade orders, performing checks and calculations, etc.

 

How API works

APIs act as an entry point for the software an investor to use the broker’s server. They are indispensable for traders who choose third-party software products and those who decide to Build a Trading Platform for their own needs.

The application programming interface opens vast possibilities for a user. For example, it can connect coded trading algorithms to a brokerage platform. It also sends orders and retrieves current or historical transaction data.

What can I do with an API?.
Fig.2 Opportunities offered by API for automated trading. Source: Daytrading

In modern online trading, the broker API is an essential element of an automated trading strategy. Before trading platforms with API appeared, investors had to perform all actions on transaction placement manually, but now this process can be automated.  

 

What to look for when choosing a broker

Many factors play a significant role when choosing a broker with API. The main ones are the countries the platform is designed for and the assets available for trading.

Let’s consider the mentioned and other selection criteria in more detail.

Available assets

Every online broker maintains a specific list of available assets. Some are limited to one or two financial instruments, such as stocks and options. Others offer their clients more opportunities, including trading a relatively new asset – cryptocurrencies.

The number of available financial instruments is not reflected in the services’ quality. Therefore, it is possible to choose a broker by this indicator, solely relying on the trader’s individual needs.

Supported countries

Some brokers are aimed at the local market; others work in every country. Again, this is not to say that some are better than others. Just choose the ones that cover your target audience as much as possible.

Commission amount

Most modern brokers have refused to charge commissions for buying and selling stocks, mutual funds, ETFs, and bonds. These are the ones to look out for to get the most out of online trading. 

As for options trades, online intermediaries generally charge a commission per contract. However, even here, you have a choice. The commission from different brokers can vary from $0.15 to $1.5.

Another asset that more and more online brokers offer access to is cryptocurrencies. If you plan to integrate your algorithmic trading app with such broker API, you should understand beforehand the commissions that can be charged for this transaction.

Reliability of a brokerage company

There are solutions in today’s automated trading market that have been proving their reliability and stability for decades. 

Some appeared not so long ago. This does not mean that they are worse because the activity of all market players is controlled by special regulatory bodies: FINRA, CFTC, NFA in the USA, FCA in Europe, and also by different regional institutes.

But when working with newcomers, the risk still exists; no one can foresee how they will behave in a non-standard market situation. For example, if the broker does not have enough cash for all client operations, they will be forced to limit the trading of certain assets.

Requirement of minimum initial investment

Not all brokerage companies require an investor to have a certain amount of money in their account to start trading. However, some do set the minimum needed, which often turns out to be $500 or more.

Additional commissions

In addition to commissions for buying/selling assets, many brokers may charge additional fees for certain services. For example, pay attention to how much it costs to close an account, transfer funds, or even be idle on the platform. 

To avoid such costs, settle for a broker that does not charge such fees. Also, note that some companies will charge transfer fees if you move to them from another broker.

A separate cost item is a payment for order flow (PFOF). This is the benefit a broker receives for directing a trade to a specific market maker for execution. Usually, it does not exceed a few cents, but with large trading volumes, the amount the trader loses can be significant.

For example, in 2020, the Securities and Exchange Commission accused the brokerage firm Robinhood Financial LLC of dishonesty. The SEC alleged that the broker failed to disclose to its customers’ accurate information about the compensation the company received from market makers.

According to the Commission’s calculations, the company’s customers lost about $34 million from 2015 to 2018. Robinhood had to pay a $65 million fine for failing to meet its obligations to complete transactions on the best possible terms for its customers.

Quality of customer support

Note that experienced traders and also newcomers can use your software. Make sure that the broker provides quality support for its clients.

This includes various educational resources, detailed instructions, and the ability to communicate with a consultant in live chat or over the phone. 

According to the British company BrokerNotes, 81% of brokers among 60 people who participated in the study provide their clients with general training. In contrast, only 58% and 39% of the platforms give access to webinars and videos for experienced traders.

Average_Education_Features_(60+ Brokers).
Fig.3. The training opportunities that online brokers provide to their users. Source: Brokernotes

Additional features and tools

It is very convenient when a broker implements the function to buy fractional shares, i.e., to buy shares not by the piece but by a certain amount. This allows people with limited budgets to join online trading or to diversify risks by investing in different assets.

As for additional broker features, one can consider the availability of analytical tools and access to statistical and research data.

Please note: Usually, online brokers charge extra for any additional features. Therefore, if you do not need these features, choose an intermediary that does not provide them.

Promotional offers

Many brokerage companies launch beneficial promotions to attract their target audience. For example, new clients may be offered an opportunity to get a cash bonus for their first deposit.

The main thing is not to rely only on such tempting offers when choosing a broker but to assess the subsequent costs. After all, a good bonus doesn’t necessarily mean the best rates.

 

Broker APIs examples

Here is a comparison table of online brokers that are the most popular with users. Please note that RNDpoint can integrate each of these broker APIs with your software.

Broker APIAvailable APICommissionsSupportedAvailable
AlpacaAlpaca broker integration is done using API-Australia, Germany, Hong Kong, India, Ireland, Japan, Malaysia, Netherlands, Singapore, South Africa, UAE, UK, USAStocks, ETFs, Cryptocurrencies
Interactive BrokersInteractive Broker integration is done using APINone for trading stocks and ETFs (for U.S. residents);
$0.65 per transaction for options, $0.85 for futures
Operates worldwideStocks, Options, Futures, ETFs, Currencies, Commodities, Currencies, Fixed Income, Cryptocurrencies
E*TRADEE*TRADE broker integration
is done using API
None for online trading of stocks, exchange-traded funds, mutual funds, and options registered in the U.S.The full range of services is available to US residents. Foreign investors can also trade on E*TRADE but with limited accessStocks, ETFs, futures contracts, options, mutual funds, and fixed-income investments (bonds)
AmeritradeAmeritrade broker integration
is done using API
None for trades in stocks, ETFs, and mutual funds;
$0.65 for options trading
USA, India, Mexico, Colombia, Argentina, Peru, Chile, China, Singapore, Malaysia, Thailand, Hong Kong, Taiwan, Switzerland, Costa Rica, and othersStocks, Bonds & CDs, options, non-proprietary mutual funds, futures, forex, and ETFs
TradierTradier broker integration is done using APINone for transactions in stocks and ETFs;
$0.35 for options transactions or $0 for monthly subscriptions
Available in more than 120 countriesStocks, ETF, Options
TradingviewTradingview broker integration is done using APIA free trial, 3 pricing editions: from $14.95 to $59.95100+ countriesStocks, Cryptocurrencies, Indices, Energy & Agricultural Commodities, Precious & Industrial Metals, Forex

 

Challenges when integrating brokers – RNDpoint experience

The RNDpoint team has extensive experience providing integration services, including Key Services for Integration With Digital Wallet.

We developed apps for trading organizations and large banks, created bots for trading, and implemented the integration of brokers with API.

Thanks to real projects from our practice, we know firsthand the pitfalls developers in this area can face.

Below, we discuss how our team solved the issues and give some recommendations on how to avoid them.

Receiving quotes without delays 

An up-to-date set of quotes in trading systems is critical information for successful transactions. The set of quotes means the price at which it is possible to buy or sell a certain financial instrument: currency, share, commodity, index, etc.

Such information comes from exchanges or third-party organizations with which integration is required. 

In one of our projects, users received data on quotes with a delay of several minutes due to many requests and a non-optimal way of obtaining information. As a result, the data was irrelevant during the transaction.

Our specialists have implemented the function of displaying any changes that occurred with the securities in the system. 

When working with stock exchanges, it is crucial to keep up-to-date with current prices. Even if you use data that was relevant just a few minutes ago, it is likely to be out of date.

Onboarding

When working on most projects for trader onboarding, our team has to generate a lot of documents and valid digital signatures. This is necessary for automatic user registration in the system.

The difficulty lies in the fact that the requirements for verifying the qualifications of investors differ from country to country. Among them:

  • testing;
  • determining limitations on the amounts and types of securities with which they can work;
  • requesting documents and/or certificates;
  • providing questionnaires to fill out.   

Such onboarding is quite long. It can take up to several days.

The RNDpoint team solves this problem by automating the process using Artificial Intelligence-based systems. We cooperate with document verification and data validation services Onfido, Veriff, Ondato, Shufti Pro, and Jumio. 

However, this approach does not always work because the legislation of some countries requires human involvement.

Scaling and internal architecture

The problem of scaling arises when a trading company starts to have more clients and more bots. It becomes difficult to trade efficiently because of the vast number of simultaneous decisions.

This was the problem of one of our clients. Their trading system contained a large set of quotes. The data array consisted of thousands of positions, which were processed by several thousands of bots. They all simultaneously loaded the system, connected to the database, and made many decisions.

Such several simultaneous processes led to problems with connections to the database, as each bot tried to create its own connection. There were also issues with selecting and launching scheduled tasks.

The way out was found: our team had to rethink the app architecture. We used several approaches: event-driven architecture, a pool of tasks, query grouping, distributed caches, and database connection optimization.

Taxes and Regulations

Each country has its own reporting requirements for trading projects. To avoid trouble, you must study and comply with them.

We encountered such a requirement in one of our projects. If a user was trading at a profit, they had to report their earnings to the tax authorities. 

To do this, we ensured that the software was integrated with the tax system. Based on historical data, we prepared documents that the user could download and submit to the tax authorities.

Storing historical data

It is crucial to store all trade data, including the history of quote changes. This information can be used to implement a backtesting strategy.

Data of this kind is also essential for portfolio analysis and reassessment. Changes in quotes directly affect their value, and it is crucial for traders to understand whether they are in profit or loss.

Prolonged execution of applications by the broker

One of the difficulties is related to the lengthy processing of orders and the need to track their status and process messages from the broker.

Integration with the exchange implies a two-way connection. We send a request to execute the order, and after some time, we receive a report on which part of the order was completed. We have to wait for an offer at the price we specify. 

Partial execution of orders causes certain problems:

  • The trading system must be online.
  • It must support the processing of events by the exchange and, at the same time, track the status of orders to cancel them after some time, notify the user, etc.

When developing a trading app, developers need to understand the process of working with an exchange. It is necessary to implement ways to track orders and prepare approaches to eliminate conflicts and problems with inconsistencies between different components.

Fault tolerance and connection recovery

Working with the exchange was organized directly through the FIX protocol on one of the projects. The problem was that only one connection to the exchange was available through it.

Our team decided to implement an alternative connection to give users a seamless experience:

  • send orders;
  • receive information about changes in the status of orders;
  • know the current quotes.

If the exchange uses the Financial Information eXchange protocol, it is essential to take special care to ensure fault tolerance and quick system recovery.

 

Pros and cons of trading using brokers with APIs

Advanced technologies, including the use of brokers with APIs, are making computer algorithms increasingly popular in electronic trading. According to Yahoo Finance, up to 73% of trading transactions are automated in the USA alone. 

However, using API in this area has disadvantages, which traders should consider. Below, we will discuss the pros and cons of broker API.

ProsCons
Process Automation. Using the API for trading simplifies the implementation of time-consuming strategies that are difficult to perform manually.The difficulty of learning. For first-time investors, it is better to practice working with the API on a demo account because this process can seem quite complicated.
Access historical data. They are needed to analyze information and test strategies.Limits. Brokers can set limits on the number of trades, frequency of receiving data, etc., in order not to overload the API bandwidth.
Automating custom indicators. You can learn about potentially profitable trades automatically.Additional fees. Some brokers charge users a profit commission for using the API.
E-mails. A trader will always know the current prices, the state of their portfolio, and other information.A compromise between speed and safety. There are protocols for APIs with different characteristics. Some of them provide insufficient security for user data.
Ability to use your own trading platform. API allows connecting custom software to the servers of the required broker if the existing terminal capabilities are not enough for the trader.

 

Building a comprehensive interface

Some brokers provide only API to their users, while many financial advisors need more functionality, including:

  • client onboarding;
  • KYC;
  • dashboard with access to investor portfolios.

Consider a personalized algorithmic trading app for your digital product needs. It will be able to implement all the functions that traders need: trading, analytics, access to information about price fluctuations, etc.

When choosing a developer to create such a software product, rely on their experience. RNDpoint has extensive experience handling projects related to automated trading.

This is confirmed by numerous successful cases in our portfolio. For example, we had the experience of Stock Trading and Investment App Development From Scratch.

 

The process of integration of a broker

For the integration of a broker API to be successful, we recommend following certain steps:

  1. Consider a trading strategy. Decide in advance what strategy you will use. This will allow you to understand its requirements (e.g., the necessary amount of historical data) and use this information when choosing a broker.
  2. Choose a broker that best meets your needs. Consider all the metrics we talked about earlier, including fees, available financial instruments, etc.
  3. Get a key for accessing the system. To do this, you need to open an account with the chosen broker and register to access the API. For beginners, we recommend opening a demo account first.
  4. Make all necessary settings. Configure the API and test your trading strategy on a demo account. This step also integrates the API with third-party software.
  5. Move on to work with a real account. You can move on to real trading after the trading strategy is tested. If necessary, contact the support.

 

Integration of a broker API with RNDpoint

RNDpoint is an integration expert in automated trading. We integrate broker API with our product ProcessMIX. It is a low-code platform for back-end development, which makes the integration process three times faster and twice cheaper

Don’t hesitate to contact our manager for a detailed consultation.  

 

Bottom Line

If you decide to integrate a broker with APIs into your digital solution, it’s essential to choose the best intermediary with your long-term goals in mind. Pay attention to the coverage of the target audience, the opportunities provided, and the billing of services.

If the existing solutions’ functionality is not enough, consider building a trading platform with API. Custom software allows you to implement exactly the set of functions that your clients need.

FAQ

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Yuliya Nenadovich
Yuliya Nenadovich
Business Development Manager
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