How to choose a Liquidity Provider and not regret it

There are many Liquidity Providers (LPs) out there for brokers to choose from. Liquidity Provider is essentially a strategic partner for brokerages, so it has to be chosen wisely. We have prepared a list of criteria to help simplify the LP evaluation process. We hope that this list will give you an idea of where to start and what to pay special attention to when looking for a partner.

However, before a broker can start looking at Liquidity Providers, they need to have a clear understanding of who they are and where they are going as a business. So, if you are a broker considering your options, first ask yourself:

  • What are my target market and business model?
  • What are my requirements? Do I have a full understanding of what I need?

Once this is clear and out of the way, it is time to go through the potential partners’ list and see which one would be the best fit. Here is a list of 9 points that we have gathered together with our partners and clients:

1. Stability

New, industry-shaking companies pop up all the time, but it is still a good idea to rely more on the established, experienced, and more mature business. What you should look for is an organization that has been on the market for a good few years, which has proven profits, partnerships, and a good reputation.

2. Offering

Is your potential LP flexible? How many instruments do they offer? How often is the offering updated and expanded? As the trading world evolves, brokers nowadays are often expected to work with multiple assets, so it is better to partner with an LP that has multi-asset liquidity.

3. Support

In a perfect world, nobody would need support, and the software would work flawlessly all the time. However, it is unrealistic for any company to claim that its products are perfect, and nothing ever goes wrong. And that’s okay, as long as there is professional technical support available. The last thing you need is an issue that takes hours to address and even longer to fix. Make sure the support is included in your agreement, and it is available to you via convenient media (email, phone, messenger).

4. Trustworthiness

It is considered a higher risk to go with an LP that is not regulated. Regulation means security, transparency, and access to information about the company’s performance. Regulated companies often follow the industry’s best practices, which means better service for brokers.

5. Pricing

Big or small, a brokerage must secure the most cost-effective offer from an LP to maximize their profits and stay competitive. At the same time, do not fall into the trap of the cheapest offers. LPs have different costs, and the price cannot go down more than a certain minimum. If the quote you are getting is significantly lower than the market average, it is probably too good to be true. Request several quotes from multiple providers to compare their spreads, commissions, overnight fees, swaps, and anything else they can charge a broker for. After all, higher pricing is usually a sign of a higher service level, and it takes a lot of expenses and investment for an LP to provide top service.

6. Execution

Your LP must be fast, have as few requotes or rejects as possible, offer post-trade transparency, and time priority execution. Make sure you have all information before you commit. Pay special attention to execution and milliseconds. It is best to test the Liquidity and track execution quality regularly, the number of rejects and slippage. All those things can vary as we operate in a highly volatile market, but you need to stay sure that those variations are under control and will not harm your reputation and profits.

7. Data and price feeds

Data and price feeds have to be reliable and fast, with no delays in reflecting the latest pricing to avoid gaps or mismatches. Needless to say, any delay is an unnecessary risk. Ask your LP where their servers and data centers are located to see how close they are to the financial capitals.

8. Software

Look for a Liquidity Provider that has their own exchange technology to connect to their providers. This ensures the quality of performance, higher speed, and better technical support.

Some list points might play a bigger or smaller role for some brokers, but it should help navigate the evaluation process and help you find the best LP out there. Tools for Brokers is connected with more than 50 Liquidity Providers, and we are continually working on expanding our partnerships. We will be happy to assist you with any queries you might have, so please email us at, add your phone number and link to this article, and we will give you a call back to find you the best fit.

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