Choosing a liquidity partner – What should you consider?


Selecting a liquidity partner also known as a liquidity provider(s) or LP,  is a critical decision that can significantly impact your business’s success. Inside of the liquidity provider category there are various “types” of companies, serving a specific role or service within the framework of facilitating liquidity (think aggregator, PoP or Prime of Prime, ECN Providers, Bank Providers, Broker Providers etc. More on the role of each in a later article).


Here are points to start digesting when you are in the market for a liquidity partner.


  • Know thyself: Have a clear understanding of your requirements and model. Think about expected trading volumes (consider potential growth as well if possible), asset classes you want to offer, regions you target, and whether you need access to specific markets or instruments.


  • Research: Things like reputation, reliability, regulation & compliance, tech, pricing models, and the range of assets they cover. There are multiple sites available, but also check members of your network or work with a consultant to build a picture.


  • Evaluate the actual liquidity: Assess the liquidity that each provider offers for the instruments you plan to offer to your clients. Look for tight spreads, low slippage, and depth of market. If possible request historical data or a trial period to gauge quality.



  • Technology and Infrastructure: Look at the supporting technology suite and infrastructure that they have in place to support the business like: execution speed, uptime reliability, order management systems, API connectivity, and risk management tools.


  • Risk Management: Look for features such as real-time monitoring, margin call mechanisms, and risk mitigation strategies to protect your brokerage from excessive exposure to market risk (some of this information may be hard to find but you can still ask).


  • Down to the dollar: Spreads, commissions, and any additional fees. Compare the costs across different providers and consider how these fees will impact your profitability and competitiveness in the market.


  • Quality of Support: Consider things like responsiveness, availability of technical support, and the level of expertise of their support team. Prompt and effective support is crucial for resolving issues that may arise during trading hours.


  • Negotiate Terms: Once you’ve narrowed down your options, negotiate the terms of the partnership. Discuss pricing, contract terms, customization options, and any additional services or incentives that can be applied to the deal.


  • Monitor Performance: Continuously monitor the performance of your chosen liquidity partner / provider to ensure they meet your expectations in terms of liquidity quality, reliability, and support services. Stay informed about market developments and be prepared to switch or add providers if necessary to adapt to changing market conditions or business needs.


The more information you have at your disposal, the better decisions you will ultimately be able to make. Keep your eyes open for opportunities to leverage the experience and knowledge of others in your decision making process.

#liquidity #liquiditypartner #liquidityprovider # lp #startabrokerage


We are available to get the discussion going if the task feels overwhelming, feel free to contact us or take a look at our Start a Forex Brokerage page.




More interesting topics to look into:


Market Depth – How deep is deep enough when it comes to liquidity?

Liquidity speed and size – What really counts and how to optimize?

Forex White Label – Discover it all, requirements and options


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