Liquidity Provider
A liquidity provider is a bank or institution that quotes prices to brokers, which route your orders to them for fills.
A liquidity provider is a bank or institution that quotes prices, and brokers route client orders to them for fills. The number and quality of providers determine a broker's spreads and slippage.
A liquidity provider is a financial institution, typically a large bank or specialist market maker, that continuously quotes buy and sell prices in a market. Retail brokers connect to liquidity providers to fill client orders: your order goes to the provider through the broker's STP or ECN setup. The number and quality of a broker's liquidity providers determine its spreads, depth and slippage. More providers usually mean better prices, because the broker can route to the best quote.
How It Works
- Banks and institutions quote continuously in size
- Brokers aggregate multiple providers for the best price
- Client orders flow to providers via STP or ECN
Trading Tips
More providers usually mean tighter spreads and deeper liquidity
A single-provider broker is more exposed to that provider's outages
Provider quality shows up in slippage during news - the invisible cost
Related Terms
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