The Importance Of Knowing Your Broker's Liquidity Provider

Many forex brokers (enclosed market-markers), are now trying to jump into the institutional business, looking to provide liquidity (execution venue) to smaller brokers, aiming to increase their volumes and therefore, profits. However, due to the fact that these liquidity venues are market-makers by nature, consequently, they will want the smaller broker having the omnibus account with them to lose its funds. It’s the big fish eating the smaller fish kind of situation!

Most liquidity venues treat the smaller brokers as retail clients and will start cutting its wings slowly (by using widely known little tricks such as re-quotes, rejections, slippage, etc), leaving no room for that account to survive. The smaller brokers’ shortage of funds and daily struggle to survive, will force them to cut-back on ad-campaigns and technological advances and consequently, prevent them from providing good service and execution to their clients causing both broker and clients to become the sad victims of these ‘almighty liquidity monsters’.

After doing a little bit of research, I am sure you will find out who the most credible liquidity providers are and when choosing a forex broker, it’s best to always ask: Who is your liquidity provider?

[B]Our suggestions:[/B]

[ul]
[li]Brokers getting liquidity from another retail broker, no matter how attractive the low spreads are, is a dangerous choice (as described above).
[/li][li]Opt for a broker getting liquidity from a serious liquidity venue who does not normally accept retail clients (individual traders).
[/li][li]Even better, go for a broker who gets liquidity from an STP (Straight Through Processing) Liquidity Venue, simply because there will be no conflict of interest between the broker and the venue.
[/li][/ul]

At the end of the day, it all comes down to you and who you think fits you the best, always based on your preferred methods of trading.

Make an informed decision, choose wisely and best of luck with all your trading activities!!!

Kind regards,

The FXNET Team.

I want to open a micro account with a broker, and i have never done so before…based on your post is there 1 you could recommend thats based in the EU?

(i have been recommended HotForex so far)

Cheers!

Dear Purplemoney,

Thank you for your comment.

I would of course recommend the forex broker i work for, FXNET. FXNET is one of the few legit STPs out there and we try to prove that to our customers every day. But beware, because, many brokers out there claim to be STPs but are really not.

If you are a newcomer to the industry, our team can provide you with 1 to 1 training and all the support you need until you start feeling confident to trade on your own.

Should you ever wish to try our platforms, please give us a call at +357 25108111 or skype me at froso.fxnet and I would be pleased to answer any questions you may have.

Have a great day!

Kind regards,

Froso

How do we know that you are not among the brokers that claim to be STP? Well, you should not advertize your company this way with the intent of discrediting other brokers. Well, today, it has been seen that even when a broker is regulated and uses a good liquidity provider, traders still need to be very careful as they have lots of tricks up their sleeves.