Forex bridge

A forex bridge, also known as a liquidity bridge, is the cornerstone of any financial company and, arguably, the most important software for brokers. The forex liquidity bridge connects trading platforms with liquidity providers (LPs), facilitating fast and accurate order execution that benefits both traders and brokers. 

In today’s article, we will explore what a modern forex liquidity bridge entails and how brokers can select the best liquidity bridge among numerous providers of financial solutions. 

What is a forex bridge?

A forex bridge is a software solution for financial brokers that connects their trading platforms (for example, MetaTrader 4, MetaTrader 5, cTrader, or Match-Trader) with liquidity providers. 

With the help of forex bridge solutions, brokers can enable the following trading models:

• Straight-Through Processing (STP) 
• Electronic Communication Network (ECN) 

The forex bridge automates order processing and execution, streamlining the process and enabling brokers to access high-quality liquidity. 

Modern forex bridges, such as Trade Processor, offer access to liquidity from multiple sources (over 100 with Trade Processor), deliver tight spreads, and transparent and best pricing for traders. 

How does a forex bridge work?

Forex bridges today differ significantly in terms of functionality and capabilities, but the core principles of their work remain the same. 

1. Traders place orders on MetaTrader or any other trading platform.
2. The forex bridge utilises FIX API to send order information to the liquidity provider. 
3. Liquidity providers execute trades and send back confirmations. 
4. The forex bridge updates statuses and pricing, reflecting data on the trader’s platform in real-time. 

This workflow ensures low latency, minimal slippage, efficient aggregation, and high-quality trades. 

Types of forex bridges

There are three main types of forex bridges that a broker can choose from for their company. 

1. STP (Straight-Through Processing): Routes orders straight to LPs, making execution faster and more transparent.
2. ECN (Electronic Communication Network): Liquidity is aggregated from multiple providers, which helps achieve the best pricing possible, as well as anonymity for traders. 
3. Hybrid: This type of forex bridge combines A- and B-books, routing transactions dynamically depending on volumes and client profiles to secure optimal profitability. 

Why are forex bridges important for brokers?

A forex bridge is a core solution for all brokers. The success of the financial company primarily relies on how well the liquidity bridge functions. 

Here are the key advantages of a forex bridge for brokers.

• Access to deep, high-quality liquidity pools
• Fast trade execution 
• Reduced slippage and associated risks 
• Multi-asset support that helps brokers expand their offerings 
• Scalability to support trade spikes during volatility 
• Detailed insights into trade and execution data 
• Built-in risk management solutions 

Combined, these features in the forex bridge empower brokers to support their traders in the best way possible, resolve any issues that occur rapidly and to everyone’s satisfaction, and strike a balance between operational risks and profitability. 

Main components of a forex bridge

Forex bridge solutions vary, but they all share several core components.

• FIX API: The ultimate industry protocol for communication between platforms and liquidity providers, widely used by brokers to integrate different solutions in their company into a single ecosystem. 
• Aggregation engine: When you’re working with multiple liquidity providers, you need to filter out some and present optimal quotes to traders. That’s what aggregation engines do. 
• Risk management: If you’re evaluating a forex bridge and it has zero built-in risk management – run away. These tools help control markups, exposure, and routing rules to ensure security, compliance, and profitability. 
• Reporting and data management: Real-time data reveals brokers’ execution speed, errors, latency, and other key metrics that require attention and prompt corrective action. With timely data at hand, brokers can reach out to support or handle the situation themselves. Yet, if they’re clueless about the recent developments, they may end up with a disaster on their hands. 

Things to consider when choosing a forex bridge provider

Several factors should be considered when selecting providers for a forex bridge solution. 

• How fast and stable the performance is. Look for a bridge that delivers high uptime, low latency, and proximity to liquidity providers’ data centres. 
• Integration potential. Are FIX integrations available to you with this company? Is the bridge compatible with MetaTrader and other core market players? Don’t lock yourself in with a solution that doesn’t fully support your business model.
• Liquidity providers’ pool. Seek a forex bridge that gives you access to versatile, high-quality LPs across different asset classes (CFDs, forex, crypto). 
• Risk management. Risks follow brokers everywhere. How well is the bridge provider prepared for them? Features like A/B Book management, flexible routing rules, backup LP, margin controls, etc., are an absolute must. 
• Professional technical support. At TFB, for example, the support team is not only knowledgeable about TFB solutions but also very experienced in the industry. This means that support representatives can see dependencies more clearly and identify the root causes of issues more quickly, saving brokers time, capital, and reputation.
• Pricing and TCO. When evaluating pricing, ensure you consider not only the license cost but also the total cost of ownership (TCO).

Conclusion

A forex bridge is the heart and centre of the company. Liquidity bridges enable brokers to manage trade execution, access high-quality liquidity providers, and scale their operations effortlessly. Selecting a reliable bridge provider will ensure the delivery of low latency and transparent pricing, facilitating sustainable business growth for years to come.