With two cha​pters of our ar​ti​cle se​ries for start-up bro​kers - Whe​re Do I Be​gin? and Choo​sing Your Pla​tform Provi​der be​hind us, we now rea​ch vo​lu​me three, no less impor​tant and equa​lly de​tri​men​tal to the pro​per fun​ctio​ning of your bu​si​ne​ss. The choi​ce of a li​qui​di​ty provi​der: how do we go about this?

Si​mi​lar​ly to choo​sing a pla​tform provi​der, it all co​mes down to un​der​stan​ding your nee​ds and fi​gu​ring out if the LP in que​stion ca​ters to them. What shou​ld one ask the​mse​lves?

1. Who is your LP?

What do you know about your LP? Pri​ma​ri​ly, whe​re are they ba​sed and are they re​gu​la​ted? Si​mply put, this is how you che​ck the tru​stwor​thi​ne​ss of your provi​der. Mo​reover, re​gu​la​ted provi​ders often grant the perk of acce​ss to tra​de re​por​ts, tick data, swa​ps and ro​llover re​por​ting, and much more.

It’s also vi​tal to keep in mind that some re​gu​la​ted LPs are not au​tho​ri​zed to work with un​re​gu​la​ted bro​ke​ra​ges. So the​re’s also the que​stion of whe​ther you are re​gu​la​ted, or when you plan on re​ceiving your re​gu​la​tion.

2. What do they offer?

In the mo​dern wor​ld of to​day, mu​lti-asset li​qui​di​ty and a deep or​der book is an abso​lu​te must. What does your LP have to offer? Not all LPs can provi​de a full sco​pe of in​stru​men​ts, but the more - the be​tter. The​re is a wide va​rie​ty and it de​pen​ds what you want to offer your clien​ts. In​stru​men​ts vary from FX pairs, sha​res, in​di​ces, co​mmo​di​ties and even ETFs. Whi​le it is true that having a broa​der va​rie​ty can attra​ct more tra​ders, it may land up co​sting more.

3. Is their exe​cu​tion speed sa​ti​sfa​ctory?

We are ta​lking about exe​cu​tion of at lea​st be​low 100ms, wi​thout re​je​cts or re​quo​tes. Exe​cu​tion speed is key par​ti​cu​lar​ly du​ring une​xpe​cted even​ts, so it’s vi​tal you not only un​der​stand clear​ly what you are si​g​ning up for, but also che​ck the exe​cu​tion is what it’s made out to be. Having se​cu​re and re​lia​ble exe​cu​tions means your tra​ders have be​tter tra​ding stan​dar​ds and can, in turn, attra​ct lar​ger tra​ders.

4. Are the fee​ds re​lia​ble?

You’d want a li​qui​di​ty provi​der that offers sta​ble and re​lia​ble fee​ds to re​fle​ct mar​ket pri​ces. Tra​ders do not like to see gaps in the chart in re​gu​lar tra​ding se​ssions. They also de​mand hi​sto​ri​cal data so that they can make their for​ward-loo​king ana​lysis. For this pur​po​se of te​ch​ni​cal ana​lysis, cTra​der cur​ren​tly offers a to​tal of 54 time fra​mes for tra​ders to choo​se from when ma​king their inve​stment de​ci​sions.

Fur​ther​mo​re, the abi​li​ty to co​mpa​re pri​ces in a man​ner that’s conve​nient to you in par​ti​cu​lar is very impor​tant to have. An acce​ss to hi​sto​ri​cal mar​ket data and a co​mple​te or​der book can go a very long way in your ope​ra​tions.

5. Can you afford them?

Whe​re wou​ld we be wi​thout our bu​d​get? Look for hi​dden co​sts. Not only shou​ld a re​pu​ta​ble LP offer co​mpe​ti​tive sprea​ds and vo​lu​me fees, but also no sky-high over​ni​g​ht fees and rea​so​na​ble co​lla​te​ral de​po​si​ts.

The choi​ce of an LP, just like any part of your star​tup bro​ker bu​si​ne​ss, isn’t one to rush throu​gh. Lu​cki​ly, cTra​der is in​te​g​ra​ted with some of the most re​pu​ta​ble LPs in the in​du​stry, with an addi​tio​nal option of in​te​g​ra​ting any new ones of your choi​ce via our FIX API. We ack​no​wle​d​ge that the se​le​ction is lar​ge, but our Sa​les team, equi​pped with years of in​du​stry kno​wle​d​ge and expe​rien​ce, is the​re to help you find the LP that re​spon​ds to your per​so​nal goa​ls and nee​ds.

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