For any brokerage offering leveraged trading products, liquidity is the foundation on which the entire business operates. The quality, reliability, and competitiveness of your pricing directly impacts your ability to attract and retain clients, manage risk, and generate sustainable revenue.
This guide explains how liquidity provision works in the retail brokerage ecosystem and what to consider when building your liquidity infrastructure.
What Is a Liquidity Provider?
A liquidity provider (LP) is a financial institution — typically a bank, non-bank market maker, or prime-of-prime broker — that supplies price quotations and acts as a counterparty to trades. LPs provide the bid and ask prices that brokerages pass through (or use as a reference for) their client-facing pricing.
In practice, most retail brokerages connect to multiple LPs and use aggregation technology to combine their pricing into a single best-bid/best-ask feed. This multi-LP approach improves pricing quality, reduces dependency on any single provider, and allows for competitive spread offerings.
Types of Liquidity Providers
Tier 1 banks (such as JP Morgan, Barclays, and Deutsche Bank) sit at the top of the liquidity chain. However, most retail brokerages don't access these institutions directly. Instead, they work with prime-of-prime (PoP) providers or non-bank market makers who aggregate institutional liquidity and repackage it for the retail segment.
Prime-of-prime providers act as intermediaries, offering smaller brokerages access to institutional-grade liquidity, credit facilities, and multi-asset coverage that they couldn't secure independently. Popular PoP providers in the industry include names like B2Broker, Advanced Markets, and IS Prime, among others.
Building Your Liquidity Infrastructure
Building a robust liquidity setup involves several key decisions: how many LPs to connect, which aggregation model to use, how to configure markup and swap pricing, which instruments to prioritise, and how to handle the technical integration with your trading platform.
Bridge and aggregation technology from providers like PrimeXM, oneZero, and Gold-i sits between your trading platform and your liquidity sources, handling price aggregation, execution routing, and risk management in real time.
Key Evaluation Criteria for LPs
When evaluating potential liquidity providers, brokerages should consider pricing competitiveness and depth across target instruments, execution quality and fill rates, the range of instruments offered, technological reliability and uptime, credit and margin terms, regulatory standing, and the quality of reporting and analytics tools provided.
It is common — and recommended — to run parallel testing with multiple LP candidates before committing to a production setup. Pricing and execution can vary significantly between providers and across different market conditions.