With two chapters of our article series for start-up brokers - Where Do I Begin? and Choosing Your Platform Provider behind us, we now reach volume three, no less important and equally detrimental to the proper functioning of your business. The choice of a liquidity provider: how do we go about this?

Similarly to choosing a platform provider, it all comes down to understanding your needs and figuring out if the LP in question caters to them. What should one ask themselves?

1. Who is your LP?

What do you know about your LP? Primarily, where are they based and are they regulated? Simply put, this is how you check the trustworthiness of your provider. Moreover, regulated providers often grant the perk of access to trade reports, tick data, swaps and rollover reporting, 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 modern world of today, multi-asset liquidity and a deep order book is an absolute must. What does your LP have to offer? Not all LPs can provide a full scope of instruments, but the more - the better. There is a wide variety and it depends what you want to offer your clients. Instruments vary from FX pairs, shares, indices, commodities and even ETFs. While it is true that having a broader variety can attract more traders, it may land up costing more.

3. Is their execution speed satisfactory?

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 feeds reliable?

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?

Where would we be without our budget? Look for hidden costs. Not only should a reputable LP offer competitive spreads and volume fees, but also no sky-high overnight fees and reasonable collateral deposits.

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.

Contact Us