How to Choose a Liquidity Aggregator

Market liquidity implies the presence of a buyer and seller for an asset capable of quickly executing an order at current prices.

The quality of a broker’s work is determined by the extent to which the liquidity provided to the client corresponds to the volume of his trade.

Liquidity Aggregator

The liquidity aggregator is software that exchanges market order quotes and flows between liquidity providers, a broker, and a trader’s terminal.

How Liquidity Aggregation Works

Using the risk management algorithm, the forex broker determines whether clients’ orders will be transferred to the A—book or B-book model.

If a trader’s transaction is transferred to B-book, the liquidity is provided by the broker itself.

If the transaction is transferred to A-book, the scheme is activated through the liquidity bridge:

1. Quotes offered by liquidity providers are placed in the market depth.

2. If the client sets a limit order, the program selects a counter-request with a suitable volume and executes it.

3. If the client submits a market order, the program determines the supplier who offered the best price, then sends a request to confirm the transaction and executes the order.

Hub Functions

The Liquidity Aggregation Center (Hub) is not just a provider through which quotes and transactions flow.

To increase competitiveness, software vendors offer additional options.

Here are Just a Few of Them:

●  Different margins for each supplier or trader.

●  Minimum and maximum spread settings.

●  Flexible configuration of customer transaction distribution between A-book and B-book

 Monitoring and reporting functions:

●  Availability of information panels

●  SQL Databases

●  Log viewing

●  Trading risk reports

Let’s summarize

There are several major aggregator companies on the market, including

In order to make the right choice, it’s vital to understand which features are most important for your business.

Pay the most attention to the following:

●  Risk management functions

●  Additional liquidity aggregation functions

●  Quality of support and monitoring

Connection and maintenance costs are crucial for small brokers.

It is safe to say that the broker’s profitability is the result of a well-structured strategy of working with the liquidity aggregator.

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