The role of liquidity providers on forex is to provide interbank liquidity access and to bring together brokerages and individual traders to increase the liquidity of the market. Liquidity providers are often large banks and other financial institutions.
Higher liquidity is a factor important for any market participant: it drives the spreads down, and hence the cost of trading goes down too.
Forex liquidity providers, along with market makers, aim at lowering volatility on the market, providing uninterrupted transactions and optimal price policy, and supporting the volume of transactions.
Straight-through processing (STP) brokers are particularly active in interaction with liquidity providers to improve their own announced liquidity and rates.
Giving a brief overview of what the liquidity provider’s business is about, we’ll see that in fact it means matching the buy and sell requests between the traders and retail forex brokers.
The key factors of successful operation of a liquidity provider are quotation prices, executable prices, spreads, rate of orders’ rejection and transparency. The competition in the industry is tough, yet companies providing best pricing and execution will always be on top of the rating.
Knowing the best liquidity providers of the present day gives better understanding on ‘who is who’ on the forex market. Vote for the best liquidity provider here!
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