The Importance Of Knowing Your Broker's Liquidity Provider - FXNET


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Many forex brokers (enclosed market-markers), are now trying to jump into the institutional business, looking to provide liquidity (execution venue) to smaller brokers, aiming to increase their volumes and therefore, profits. However, due to the fact that these liquidity venues are market-makers by nature, consequently, they will want the smaller broker having the omnibus account with them to lose its funds. It's the big fish eating the smaller fish kind of situation!

Most liquidity venues treat the smaller brokers as retail clients and will start cutting its wings slowly (by using widely known little tricks such as re-quotes, rejections, slippage, etc), leaving no room for that account to survive. The smaller brokers' shortage of funds and daily struggle to survive, will force them to cut-back on ad-campaigns and technological advances and consequently, prevent them from providing good service and execution to their clients causing both broker and clients to become the sad victims of these 'almighty liquidity monsters'.

After doing a little bit of research, I am sure you will find out who the most credible liquidity providers are and when choosing a forex broker, it's best to always ask: Who is your liquidity provider?

Personal suggestions:

-Brokers getting liquidity from another retail broker, no matter how attractive the low spreads are, is a dangerous choice (as described above).
-Opt for a broker getting liquidity from a serious liquidity venue who does not normally accept retail clients (individual traders).
-Even better, go for a broker who gets liquidity from an STP (Straight Through Processing) Liquidity Venue, simply because there will be no conflict of interest between the broker and the venue.

At the end of the day, it all comes down to you and who you think fits you the best, always based on your preferred methods of trading.

Make an informed decision, choose wisely and best of luck with all your trading activities!!!
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