There is no single best liquidity provider, there’s the best liquidity provider for your business.  For instance, not every broker will be able to open an account with JP Morgan. Nor would they want to, even if it were possible. Tier 1 liquidity providers – such as Deutsche Bank and Morgan Stanley – don’t deal directly with individual traders or with small brokerages. But if they did, they would be too expensive for smaller trading companies, anyway. 

That raises a quandary: where do emerging brokerages secure liquidity? If the top banks often provide the narrowest spreads, and small brokers mostly can’t access the top banks, how can small brokerages ever grow their businesses and compete with established players? 

Understanding Prime of Prime liquidity  

Here’s where Prime of Prime (PoP) liquidity providers provide a critical role. PoP providers have accounts with Tier 1 liquidity providers and in turn provide liquidity to smaller companies, such as retail brokerages. They effectively act as an intermediary between Tier 1 providers and brokers.  

In practice, the intermediation is a complex process: a good PoP will generally have access to multiple Tier 1 liquidity providers and other sources of liquidity. This enables them to provide customised liquidity to clients. Importantly, it also means they can offer access to a broader range of financial products and currency pairs.  

For brokers, a PoP offers deep liquidity and simplicity. Your operations are more streamlined because you can deal with one provider that connects you to multiple sources of liquidity. Moreover, with a good PoP partner, you are able to trade in multiple assets and access a range of financial products, without being restrained by access to liquidity.   

Of course, not all liquidity providers are equal. Here’s a checklist to help you choose the right liquidity partner to help grow your business. 

1. Is there a comprehensive product offering?

Many ordinary liquidity providers may struggle to provide a wide range of currency pairs and investment products. A world-class PoP liquidity provider will offer more currency pairs and a suite of assets and products.   

2. Do they have multiple, quality sources of liquidity?

If your liquidity provider has access to a network of Tier 1 liquidity providers, and other sources of liquidity, they are in a stronger position to offer you competitive pricing. 

3. Do they offer customised service?

No two brokerages or financial services firms are the same. Your needs are not the same as your competitors. And as your business grows and evolves, your liquidity requirements will change. For that reason, a good liquidity provider should offer customised service that helps you stay competitive. 

4. Can they offer world-class expertise?

Does your liquidity provider have a team of experts who can help you navigate volatile market conditions? 

5. Are they an award-winning liquidity provider?

This is far less important than checking the fundamentals are in order. But still, it’s reassuring to know that a company has been recognised by its peers and industry experts.   

Your award-winning liquidity one stop shop 

Finalto is an award-winning liquidity provider that offers customised, liquidity solutions and proprietary technology to help you accelerate and maintain growth.  

We use bespoke liquidity pools tailored to connect your demand with market supply as quickly as possible. Plus, our liquidity technology provides retail brokers with multi-asset execution, prime brokerage services as well as a sophisticated suite of trading tools. 

To learn more about our best-in-class liquidity, execution and prime broker solutions, across multiple asset classes, get in touch with our team.  

Or download the Finalto Broker Handbook for a comprehensive guide to liquidity, technology and more.  

All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.