As we all know, for any securities firm, the liquidity provider (LP) plays a very important role, especially in the process of customer transactions, the stability and continuity of LP is particularly critical, which is related to product quotations and clearing channels. Speed, depth and stability. Therefore, when selecting a liquidity provider for a new retail foreign exchange trading platform, it is necessary to have a deep understanding of the intended LP.
Why choose an LP with "excellent technology"?
What role does LP play in the foreign exchange market? In the global foreign exchange industry, well-known liquidity providers mainly come from countries or regions with developed financial industries such as Europe and the United States, and some LPs even have more than ten years of experience in the field of financial derivatives.
In the process of foreign exchange transactions, foreign exchange liquidity providers provide foreign exchange and CFDs services to individual and institutional customers, providing direct access to the interbank market and the aggregated liquidity of the foreign exchange departments of the world's top liquidity banks. In order to ensure price stability, liquidity providers will establish currency pair positions, which are either closed by other market makers or liquidated later.
The three major measures of liquidity are size, price and time. When the market liquidity is abundant, investors can successfully conduct a large number of transactions near the real-time price, and the time is very fast. A popular indicator of liquidity is the bid-ask spread (spread), and liquidity is an important characteristic of a well-functioning market that inspires confidence in the market.
Platform operators can directly consult liquidity when choosing. Each LP has different fees, different cooperation thresholds, and different trading products. Platform operators can choose the one that suits their needs for cooperation.
picture
Select LP to refer to the following 5 criteria
Due to the mature development of the foreign exchange industry, LP can be not only a bank, but also a broker and so on. And choosing your liquidity provider is like buying clothes. One size of clothes cannot fit everyone, so there is no one liquidity solution that can solve all problems. At present, there are many LPs to choose from on the market, so how to judge which one is suitable for you? You can refer to the following 5 standards:
No.1
Credibility, governance and transparency
We deliberately made this criterion a top priority, as nothing is more important than the reputation and credentials of a liquidity provider. An institution acting as a liquidity provider does not necessarily have a strong financial background and is not prone to bankruptcy. Therefore, brokers should do more research on the liquidity providers they are about to cooperate with. Before signing a contract, they must evaluate their regulatory qualifications, past bad records and other aspects.
No.2
Product and Service Advantages
Before choosing a liquidity provider, a securities firm must first determine its service and product positioning. For example, what trading products will be provided? foreign exchange? gold? In recent years, virtual currency has become very popular, and many brokers have joined the category of virtual currency products. Are you excited? However, not all liquidity providers have this service. Also, what non-FX products would you like to offer, such as diamonds, stocks or energies? Every liquidity provider has its strengths, and your job is to gauge which ones are best for your business.
No.3
quotation
To ensure your clients have a positive trading experience, it is best for brokerages to be open and honest with liquidity providers about who your target clients are. This is very important. The quotations and other trading environments obtained by customers during transactions are based on your business and liquidity providers. If the liquidity provider offers X and the broker Y, then your clients are bound to have problems with execution and trading.
No.4
implement
Reliable liquidity providers should execute customers' trading orders at the best price in the shortest possible time, while the trading process is completely transparent. The execution speed provided by the liquidity should be at least not lower than 100ms, and there is no phenomenon of rejection of transactions or repeated quotations.
In addition, the transaction execution system of the liquidity provider must meet high standards, especially during major risks or emergencies such as black swans, the system can cope with these potential risks.
No.5
Service Level and Quality
While this point is obvious, it is important to make sure that the liquidity provider offers what you need. Can the brokerage contact the liquidity provider in time? If a broker needs 24-hour support, can the products and services currently provided to you meet your needs?
Add
