Features of Liquidity Providers and Differences Between Them

The international currency market has been operating for centuries. And hundreds of countries, as well as millions of traders, are taking part here. Forex clients trade currencies, which guarantees high liquidity. This is why many companies are thinking about how to start a forex business. But every newcomer will have to face a high level of competition. This is not surprising, because the client chooses from three thousand sites. Obviously, the company needs to create the best conditions for the potential client. And cooperation with a quality liquidity aggregator will be an additional benefit for the platform.

Main Tasks of Liquidity Providers

Every new participant in the foreign exchange market must understand how it works. Of course, there are a huge number of nuances and pitfalls here, but there are also global tasks for this platform. For example, Forex is a platform where any participant can buy, exchange or sell a chosen currency. The size of the trade does not matter. The trader buying $100 and the US government selling billions are players in the Forex market.

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Interestingly, such transactions are concluded and implemented almost instantly. The delay in the execution of orders in Forex is minimal and is about 50 milliseconds. In the case of ordinary traders, this is understandable, but how are large trades executed? This is where pools of liquidity come into play: large banks, investment funds, giant corporations. Their participation helps to complete the transaction quickly and conveniently.

But a broker who decides to start a cryptocurrency exchange and offer services on Forex cannot work directly with such companies. And here the help of a quality liquidity provider is already needed. LP acts as an intermediary between the broker and major liquidity providers.

Differences Between Liquidity Providers and Market-Makers

Some newbies and brokers who decide to create a crypto exchange sometimes confuse liquidity providers with market makers. But these are different participants in the Forex market with different functions and features.

Market-makers are large Forex players with a large pool of liquidity and guaranteeing timely execution of orders. Such banks, hedge funds, corporations are able to activate the market. Moreover, some brokers can also be market makers. But this solution significantly limits the depth of the order book. After all, it contains orders only from clients registered on the platform.

To solve this problem, forex prime brokers strive to partner with quality liquidity providers. It is important to turn to the best partners and reliable companies with an excellent reputation. This improves the efficiency of the platform. Also, remember that there are several types of liquidity providers.

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Different Types of LP

There are two main types of liquidity providers: Tier1 and Tier2. The first segment is made up of large players. Such suppliers cooperate with global banks and investment funds. Barclays, Morgan Stanley, BNP Paribas, UBS, and others are also on the list of their partners. Such cooperation allows achieving practically zero spread and maximum liquidity.

Tier2 liquidity providers are market makers and work most often with retail traders and small amounts of money. They cooperate with one bank and most often act as interbank intermediaries. Obviously, the conditions here are less attractive for brokers who have decided to start a cryptocurrency exchange.

Cooperation with the Best LP

Choosing a quality liquidity provider and working with it is an important aspect of success if you decide to start a cryptocurrency exchange. Moreover, LP is able to provide fast transaction execution speed, as well as to protect the order from price slippage. Therefore, it is important to pay maximum attention to this aspect and make the right decision.

B2Broker is able to offer new players a wide range of great opportunities and possibilities on the road to success. The liquidity provider provides quality intermediation with Tier1 investment funds and gives you access to large pools of liquidity with eighty trading pairs. Moreover, the order execution speed is also minimal – from 12 milliseconds. Customers can also access excellent white label cryptocurrency exchange software and other turnkey solutions.

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