Selecting The Best Liquidity Provider For Your Forex Broker – 5 Helpful Tips
Reputation, product availability, and trading conditions are some of the factors to consider when choosing a forex liquidity provider.
Due to the maturity of the online forex industry, there are now a plethora of liquidity providers, often referred to as LPs, that forex brokers can choose from. Similar to shopping for a nice suit, there simply isn’t a “one-size-fits all” solution when it comes to selecting a forex liquidity provider; each situation depends on the unique needs of your FX brokerage.
With a multitude of liquidity providers available in the market place, it can often be difficult to decide which is the best provider to partner with. To offer some guidance, we’ve outlined some of the top questions both new and existing forex brokers should ask themselves when selecting a forex liquidity provider.
#1. Is the Liquidity Provider Regulated? What type of Reputation does the LP have in the Market?
Nothing matters more than the level of trust you have in the liquidity provider you choose to partner with. It’s important to highlight that just because a firm is able to offer liquidity services, doesn’t necessarily mean it is immune from bankruptcy. For this reason, it’s crucial to heavily research the the LP you are thinking of partnering with and not to be afraid to ask very pointed questions about the provider’s licenses, safety of funds offered to clients, as well as the historical track record.
Regulation happens to be an excellent way to weed out potential liquidity providers as we would advise against opening an account with an unlicensed, or unregulated liquidity provider. Even if the provider you are considering is regulated, it still makes sense to do some homework on the company before signing up. The time spent learning more about the potential LPs you wish to work with will well be worth the investment of time as you will learn more about the nuisances of the industry as you go along.
#2. What Terms & Conditions Does the LP Offer?
The specific conditions offered by the liquidity provider are important to review before signing up. For example, if your broker is interested in offering money management services, it’s important to determine if the LP can also offer the type of MAMM and PAMM software required by your clients. In addition, if you’d like to launch your own MT4 or MT5 white label, you will need to be confirm that the liquidity providers you are researching can accommodate this request. Finally, you may have specific spread and commission figures in mind, it’s important to mention these upfront when speaking to any potential LP as some may not be able to offer what you are looking for.
#3. Make Sure to Know Your Clients Before Opening an Account with a Forex Liquidity Provider
To ensure a positive trading experience for your clients, it’s important to be up front with your liquidity provider about the type of traders you’ll be targeting and signing up. The reason this matters is that the pricing, execution, and other conditions offered by the liquidity provider are heavily based on the type of clients you are working with. If an LP is expecting X, yet your broker ends up delivering Y, it can result in execution issues and other problematic situations for your clients.
#4. Level of Service and Quality
Although this point appears obvious, it’s important to ensure the type of service offered by the LP meets your needs. Do you have access to an account manager who is available to speak to you on your time zone? Perhaps you have a business partner, or other type of partnership that requires support in a foreign language. Can the forex liquidity provider you are researching facilitate support in the native language of your team? Furthermore, does the LP have a local presence in the region where your partners / team is based? By addressing these questions, you’ll be able to narrow down the field of choices, making it easier to select the best forex liquidity provider for your new brokerage.
#5. What Trading Products and Services Does The Forex Liquidity Provider Offer?
Finally, it’s important to decide which trading products your broker would like to offer before you open an account with a liquidity provider. Recently, we’ve received an uptick in requests for liquidity services in the major cryptocurrencies such as Bitcoin, Etherium, and Ripple. Although there is now increasing demand for these products, not all LPs are able to offer them.
If you are looking to start your own forex brokerage, would a lack of cryptocurrency products be a deal breaker for you? What type of non-forex trading products such as stocks, energy, and metals does your brokerage wish to offer? The answer to these questions will be useful in helping you decide which liquidity provider makes the most sense to partner with.
Contact Atomiq Consulting Today for Guidance on Selecting the Best Forex Liquidity Provider for Your FX Broker
Whether you intend on creating your own forex broker or a currently part of an established FX brokerage, don’t hesitate to contact Atomiq Consulting for guidance related to choosing a forex liquidity provider.
Our team of seasoned FX industry consultants will be happy to offer our industry expertise, address your questions, and also connect you to some of the most reputable and reliable liquidity providers in the marketplace.
