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A liquidity aggregator is responsible for quoting both the purchase and a sell rate for a specific asset. Moreover, this company benefits from the spread between Bid and Ask prices. With the help of LPs, traders/investors can efficiently operate with liquid assets.
Let’s fing out more about the notion of liquidity. It is a concept that relates to financial markets, which describes the ease of the asset conversion into cash. Liquidity is essential for all kinds of tradable symbols (e.g., crypto payments) since it affects the deal’s profitability. The more liquidity the market holds, the more favorable pricing is presented to traders/investors. The asset markets need to provide the top liquidity because it helps to stay still and operate correctly. But what companies can aggregate different types of liquidity? Let’s learn this question in more detail.
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What is a Liquidity Provider? (LP)
A liquidity provider is a specific financial institution that operates as the market maker to provide proper order execution.
Different types of market players aggregate liquidity for tradable assets. Banking venues, investment funds, Forex prime brokers, investment managers, and private traders can be considered as LPs. The top companies are called Level 1 liquidity aggregators. They include the most prominent banks (BNP Paribas, Deutsche Bank, Barclays, Goldman Sachs, and many others).
Key Features to Analyze When Looking For a Liquidity Provider
If you want to smoothly start a cryptocurrency business or an FX broker, you need to select the LP wisely. This company should be reliable and hold a good reputation. Further, the liquidity provider needs to provide a user-friendly website and a wide scope of customizable services. Fraudulent companies prefer to manipulate quotes for their own profit, causing tremendous losses to their customers. This is why you need to analyze all market options deeply. Let’s look at the checklist of the essential features of the high-end liquidity provider.
Overall Package On Offer
It is vital to examine all company bundles from the liquidity providers. Different crypto exchange development companies have different demands, so they need to look at what assets and kinds of liquidity are provided. Along with the multi-symbol liquidity, reliable providers need to open the historical data for all assets. Moreover, individual accounts for different currencies, the presence of the top digital coins, and broad deposit/withdrawal features are also a plus. When these core aspects are favorable, you may get the most from the LP.
Fast Order Filling
It may sound too logical, but liquidity providers should present the instant order execution with real-time price updates. This is essential for a current market that is mainly dependent on various market news.
Order Book
The first-class liquidity aggregators need to pay due attention to this aspect. It is a liquidity indicator since the actual Bid/Ask orders for a specific asset are shown. The more buy and sell offers for a particular currency or crypto coin, the deeper the order book of the crypto exchange White Label.
Pricing
It is a core feature for newcomer brokerage companies that need to choose a trustworthy liquidity aggregator. First and foremost, the company’s offer should include favorable spreads, low trading commissions, and swaps.
Authenticity
It is also crucial for liquidity providers as for the brokerage companies when it comes to the regulation. If the company has a license in a trustworthy jurisdiction and partners with top financial institutions, you may be safe about your crypto exchange development.
Data Feeds
Another key characteristic is the ability to provide credible client data feeds. For instance, price feeds need to show the actual quotes from all the cryptocurrency and fiat exchanges and the FX market. Delay in data delivery may turn into gaps and price slippage.
Reporting Network
Reporting features are critical for proper operations on the dealing desk. Therefore, the LP needs to provide a full-fledged reporting network that complies with all regulatory norms. It must get you access to the trade information, FIX bridge reporting, as well as the order book history.
Software
Finally, a liquidity aggregator should use the White Label Forex software that supports FIX Protocol, different APIs, MT4/MT5 integration, and FIX bridges.
Therefore, business founders need to learn about the top liquidity providers on the market and select the best-matching solution. It will meet your demands and take your FX or crypto brokerage business to new heights.
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