9 August 2017

Best liquidity provider – Why you shouldn’t always focus on low spreads

Wondering what to consider when choosing the best liquidity provider? Trade with a market maker or STP Broker? Depend on only one LP? Below you’ll find some guidance.


The Retail FX trading is currently soaring. and the trading marketplace is dynamically growing. This results in numerous possibilities, but due to the emergence of many brokers and liquidity providers on the market, the selection of partners to trade with should be a well thought-over decision. To help you take it, below you will find information on what to pay attention to when choosing the liquidity provider.

Features of the best liquidity provider

A liquidity provider can be an individual or institution that brings brokers and prime brokerages together. He could act as both the buyer and seller of a particular asset or direct the orders straight to the market. Liquidity providers ensure greater price stability and help to smaller brokers to hedge their risk.

What features should best liquidity provider have?

Stability – It’s best when he’s been operating for a longer time and has a proven reputation and long-term partnerships. Thus we can presume that his presence on the market is not temporary, and long-term relationships are of paramount importance in today’s changeable market conditions


Excellent offer – The liquidity provider should have a broad, evolving offer, including tailor-made solutions, which enable to gain competitive advantage. It’s advisable to do a market research on prices and price feeds offered by different providers. Liquidity provider should also constantly develop the offer to keep up with market trends.


Flawless contact – Although trading takes place mostly online, you should check if there is any phone contact with your provider, and whether he will be able to answer your queries 24/7.If you are sending an inquiry, see how well and how fast it is handled. It can give an idea on a commitment to the clients.

Type of company that’s also significant is the size of the company’s balance sheet, which will have an impact on the size of trades the provider is able to effect, as well as on the security of your financial resources. You should also check your partner jurisdiction.

Some business models opt for the solution that having only one liquidity provider is enough. The opinions on this matter are varied since today there are so many companies on the market to choose from, why should we stick to only one.




The biggest advantage is the decreased maintenance costs of your system, but a greater number of LPs reduces the risks associated with trading, like technical failures, inflated commissions, thinner liquidity and wider spreads or not being able to trade on selected instruments. And finding a quick alternative is not possible because it takes weeks to connect to another liquidity provider.

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