How to find a reliable liquidity provider: useful tips

On the one hand, the Forex market is still a fertile ground for newcomers and beginner brokers may achieve success. On the other hand, the sector is rich in large brokerage companies; this is why it’s a challenging task to find your place in the sun. While a newer company is going to enter the market, a reliable and powerful liquidity provider (LP) is required. Who is liquidity provider, and what is its role?

The role of liquidity providers?

Why are LPs important for a beginner broker? Such companies expand your order book, executing traders’ orders instantly. This said users get the most beneficial conditions and stay on your platform. Insufficient liquidity forces traders to buy assets higher and sell lower, and this tendency leads to heavy losses.

Since an order book has obtained a string of bid and ask orders, traders are able to apply diverse strategies and get profits. What is liquidity provider in crypto, Forex, or ETF? That is a company that connects traders with the market. Those companies aggregate rates offered by the largest banks, top hedge funds, and other institutions and display the rates in a broker’s order book.

How to become a liquidity provider?

Imagine the situation when you enter the Forex market as a broker but have no desire to cooperate with LPs. Such a role is available without third parties. For instance, a broker commences to offer FX exchange services, and an order book contains bids and asks of registered users only. That means a brokerage company provides liquidity inside itself.

Meanwhile, this model contains diverse cons. While talking about liquid currency pairs like EUR/USD (20.03% of the overall market trading volumes) or USD/JPY (13.98%), the number of bid and ask prices is large enough to cover every demand. What about less popular pairs (XAU/USD, EUR/CHF, XAG/USD)? Order books may not contain the required units, and traders face losses. Such situations force users to find other brokers with 0 spread and no gaps.

Eventually, beginners understand how do liquidity providers work, and why these companies are of much account. Meanwhile, newcomer brokers need to select a reliable LP.

Useful tips to choose a trustworthy liquidity provider

While looking for an LP, take the following useful tips into account:

1. Tier 1 companies are the best choice, as such providers connect brokers with the largest financial institutions (BNP Paribas, JP Morgan, etc.).

2. A reliable LP offers diverse liquidity options, including Forex, metals, indices, and other assets.

3. Trustworthy companies offer multi-lingual 24/7 support to solve brokers’ problems within the shortest terms.

B2Broker is a safe harbor for beginner brokerage companies, as the company suggests diverse useful services. What is meant by liquidity provider? A company that expands a broker’s order book; meanwhile B2Broker goes forwards. New entries may get the complex support of experienced professionals. Numerous turnkey and White Label solutions are about to give a jumpstart on the FX market.