Here are some of the common questions asked on any FIX (financial information exchange) protocol or financial interview on investment bank. Most of these are asked to Java developer who needs to work in Cash Equities and FIX Engines but they are also important for Business Analyst, Quality Analysts and Support Analysts. These questions are just some on top of my mind please add any other questions you have faced in your financial interview position , I would add them in list.
What is an Exchange?
Exchange – An exchange is a highly organized market where (especially) tradable securities, commodities, foreign exchange, futures and options contracts are sold and bought.
- · What is an Exchange?
- · What is the difference between a Stock and a Bond?
- · What is the difference between Sell Orders and Short Sell Orders?
- · What is naked short and what is covered short?
- What is the difference between an ECN and an exchange?
- What is the difference between an ECN and an exchange?
- · What is FINANCIAL INFORMATION EXCHANGE (FIX) Protocol?
- · What is limit order?
- · What is a market order?
- · What is a stop or stop loss order?
What is an Exchange?
Exchange – An exchange is a highly organized market where (especially) tradable securities, commodities, foreign exchange, futures and options contracts are sold and bought.
Exchange brings together brokers and dealers who buy and sell these objects.
Examples of exchanges are Bombay Stock Exchange, New York Stock Exchange (NYSE), Tokyo Stock Exchange (TSE)
what is the difference between a Stock and a Bond?
Stock is equity instrument while Bond is debt asset. Since equity is more risky associated with Market Risk it can provide more returns while Bond is
relatively safer instrument so it provide predefined interest called "coupon" though Bond is also associated with Counter Party Risk.
What is the difference between Sell Orders and Short Sell Orders?
Sell means selling your own securities , short selling means selling securities without owning them normally broker lend securities to user.there are
two kinds of short sell e.g. Covered Short Sell and naked Short Sell, most of the stock exchanges doesn't allow naked short sell because its normally abused to take stock price downward.
What is naked short and what is covered short?
Naked short is when trader sells one stock which they don’t own at that moment. Covered Short Sell means that trader owns stock which they are shorting.
What is the difference between an ECN and an exchange?
ECN is an Electronic Communication Network ,An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over the counter market maker, and permits such orders to be entirely or partly executed.
Examples of exchanges are Bombay Stock Exchange, New York Stock Exchange (NYSE), Tokyo Stock Exchange (TSE)
what is the difference between a Stock and a Bond?
Stock is equity instrument while Bond is debt asset. Since equity is more risky associated with Market Risk it can provide more returns while Bond is
relatively safer instrument so it provide predefined interest called "coupon" though Bond is also associated with Counter Party Risk.
What is the difference between Sell Orders and Short Sell Orders?
Sell means selling your own securities , short selling means selling securities without owning them normally broker lend securities to user.there are
two kinds of short sell e.g. Covered Short Sell and naked Short Sell, most of the stock exchanges doesn't allow naked short sell because its normally abused to take stock price downward.
What is naked short and what is covered short?
Naked short is when trader sells one stock which they don’t own at that moment. Covered Short Sell means that trader owns stock which they are shorting.
What is the difference between an ECN and an exchange?
ECN is an Electronic Communication Network ,An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over the counter market maker, and permits such orders to be entirely or partly executed.
An ECN connects major brokerages and individual traders so that they can trade directly between themselves without having to go through a middleman. Sometimes ECNs are also referred as dark pool.
What is FINANCIAL INFORMATION EXCHANGE (FIX) Protocol ?
The Financial Information exchange (FINANCIAL INFORMATION EXCHANGE (FIX) protocol is an electronic communications protocol for international real-time exchange of information related to securities transactions and markets.
Most of the electronic trading is done in FINANCIAL INFORMATION EXCHANGE (FIX) , though different exchanges has there own native protocol but most of the broker supports FINANCIAL INFORMATION EXCHANGE (FIX) protocol.
What is limit order?
As per FINANCIAL INFORMATION EXCHANGE (FIX) protocol A limit order is an order to buy a security at no more than a specific Price (can be bought lower price) or sell at not less than a specific price (can be sold at higher price).
This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed. a limit orders can be executed at on price or better price.
Here is how a Limit Order book looks like :
IF you send a Buy Limit order higher than 99.99 then you will get immediate fill
What is a market order?
In FINANCIAL INFORMATION EXCHANGE (FIX) protocol a market order is a buy or sells order to be executed by the broker immediately at current market prices. This could prove very dangerous in terms of price because it doesn't care at what price its buying or selling securities.
What is a stop or stop loss order?
In FINANCIAL INFORMATION EXCHANGE (FIX) protocol A stop order ( also stop loss order) is an order to buy ( or sell) a security once the price of the security has reached above ( or fall below) a specified stop price.
When the specified stop price is breached, the stop order is entered as a market order ( no limit).
To read more about FINANCIAL INFORMATION EXCHANGE (FIX) protocol, please see my FINANCIAL INFORMATION EXCHANGE (FIX) Protocol tutorial series
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To read more about FINANCIAL INFORMATION EXCHANGE (FIX) protocol, please see my FINANCIAL INFORMATION EXCHANGE (FIX) Protocol tutorial series
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2 comments :
Yesterday I had interview with one of the big investment bank and they asked about FIX protocol , What is FIX protocol ? what is different version of FIX protocol , which version of FIX have you used , difference between FIX4.2 and FIX4.0 etc.
Thanks I had googled this before interview and your blog helped me a lot.
Some more questions ...
what is SWAP?
What is OTC products?
What are two exchange traded derivatives?
What is difference between OTC and exchange traded derivatives?
What is Interest rate SWAP?
Please answer if you know the answer.
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