How to Choose your Liquidity Provider?

If you are building a new FX business or carrying on with your existing brokerage firm, then finding a reliable LP would be or must have been a daunting task. And if you are planning to start your own brokerage, you must be looking for a reliable broker or institutional liquidity provider to facilitate trading in the security. Here are some of the factors which can be considered by a broker when selecting a prime LP.

  • Which category do you belong to?
    • An individual trader
    • An individual company trading upon its own or its investors’ funds
    • An FX brokerage firm or company
  • The time for which you have been in your current business.
  • The profit you made per month based upon the standard lots.
  • What exactly is your trading style, strategies etc.?
  • The platform used by you in trading. Is it your own or are you trading via FIX API, MT4?
  • What are the statistical numbers for positive and negative slippage? This component is helpful in calculating your exact profit and loss.

Other than the above mentioned points, you must also consider the following:

Pricing: Liquidity is the ultimate factor any broker or white or grey label looks for. If one gets tight spreads then the probability of earning greater profits. Tighter spreads help in making the broker competitive and reduce its trading cost. So, wisely choose your LP; make comparisons of various LPs’ pricing.

Trust: Whenever you plan to enter into the FX business, you make plans to be associated with Liquidity providers for a long-term. A company’s reputation and reliability is of paramount importance as you would never want that your business associates do not get out of their business and leave you in the middle.

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