is it important to choose brokers with the right liquidity providers?

What is liquidity?
In order to understand the role of liquidity providers in the forex market, it’s important to first understand the concept of liquidity. Liquidity is a term that is used to describe the ease of locating buyers and sellers in the market. Having greater liquidity facilitates easier transaction flow without any major impact on the exchange rates. On the other hand, low liquidity indicates higher volatility causing the prices to fluctuate.

Market liquidity impacts everything from the speed to open and close positions,slippage to difference in bid ask spreads. It is therefore clear that the role of liquidity providers is important to bring price stability in the market.

Who are Liquidity providers?
Liquidity providers function as intermediaries who enable traders to open and close positions easily without the need to find buyers and sellers themselves.

What are the best type of liquidity providers?
The top liquidity providers are called tier-1 liquidity providers. They connect a broker with giant commercial banks and funds which makes them capable of providing tightest spreads and faster execution to their clients. The broker who is connected to a large number of liquidity providers is considered better because traders may not face any gaps in the prices while executing trades.

You would be surprised to know that most of the brokers don’t like to share the information about their liquidity providers with their clients. Some brokers only share this information if the client wants to deposit a big amount and has provided the proofs for that.
However, here is a list of three best brokers who not only get their liquidity from tier-1 liquidity providers but are also transparent about this information:

1. TurnkeyForex
TurnkeyForex aggregates their liquidity from 20 tier-1 banks to provide best quotes.
Spreads: 0.0pips on ECN accounts,
Minimum deposit: $10

2. SageFx
SageFx is another best broker who gets their liquidity from tier-1 banks.
Spreads: starting from 0.1 pips
Minimum deposit: $10

3. AmegaFx
AmegaFx is also a tier-1 broker
Spreads: Starting from 0.0 pips
Minimum Deposit: No minimum deposit.

4. Coinexx
Coinexx too gets their liquidity from top liquidity providers
Spreads: starting from 0.0 pips
Minimum deposit: $5

I would suggest anyone using the scalping or intraday trading strategy to not overlook this important aspect in a forex broker. Because a lot depends on the spreads, which are essentially dependent on the LPs.

Yes, it is indeed an important factor but traders don’t give enough importance to liquidity providers while they research about any particular broker, but the whole purpose of trading is to buy and sell at profits. Execution speed, trading costs, slippage and a lot of other things depend upon liquidity and tier-1 LPs should be the only choice of a trader if they want to open and close positions hassle free.

Yes, it is preferable to choose brokers with the right liquidity providers. The higher the amount of liquidity, the lower is the impact of volatility on your trade. If your broker provides higher liquidity, you will enjoy hassle-free transactions without much impact on rates. Reliable ECN brokers provide higher liquidity. ECN brokers act as financial intermediaries using Electronic Communication Networks (ECN). They offer you direct access to interbank liquidity providers via ECN operators. The main advantages of working with ECN brokers are they offer direct access to premium liquidity providers of the market without any third-party interference, and of course, they offer far more transparency & reliability.

I agree with you that many brokers refuse to share information about their liquidity providers openly. Thank you for sharing the list. Right liquidity providers should really be an important factor to consider as it brings price stability. Higher liquidity drives down the spreads and trading costs, making it easier for traders to buy and sell currencies.

Working with a single liquidity provider is beneficial for the broker as it is less expensive, but if the broker works with multiple liquidity providers, they can serve their customers with better offers and lower trading costs. Choosing a broker who is connected to at least 10-20 tier-1 LPS is in the best interest of traders.

Yes, it is important to choose a dependable broker with the right liquidity providers. Because, if your broker provides lower liquidity your trading will be affected by the volatility of the market and your trading transactions will get delayed. You can look for an ECN broker for higher liquidity. They can link you to the ECN operators who provide straight access to liquidity providers. ECN brokers not only provide better liquidity, but they also offer tighter bids by providing lower spreads.

Thanks for sharing. I would even add finprotrading to the list because of the tight spreads that they offer. There is rarely any slippage and my orders get filled at best prices, which might be because of the LPs associated with the broker.

Yes, it is very important to choose a broker with the right liquidity providers.

What are liquidity Providers?
They are the mediators between the market makers and brokers. These are the companies that connect brokers with market makers which are big financial institutes/ investment banks.

Role of Liquidity Provider:
Liquidity Provides helps the brokerage company to execute all the orders of tons of bids and ask orders for the majority of trading pairs in the order book. Due to this traders access low spreads on the orders.

Types of Liquidity providers:
Tier 1: These Liquidity Providers are of first level that connect the broker to the hub of liquidity. The order book of such companies is linked to a trading volume of billions of dollars.

Tier 2: It connects brokers with one single bank or certain institute.

@clintkellycygnus Is there any broker in the list that you personally use and can recommend to a new trader? I am basically looking for lower spreads and even testing a few brokers already.

Thanks for sharing. I would even add finprotrading to the list because of the tight spreads that they offer. There is rarely any slippage and my orders get filled at best prices, which might be because of the LPs associated with the broker.

Do they offer micro accounts because I’ve just started out and I want to start with a small position size initially?

This thread is really helpful but I found, all these are offshore category brokers. I keep myself with a regulated broker to avoid any misdo when trading online. I have seen a few like fxview, tickmill or fxpro that also offer tighter spreads and have a pool of LPs. I think that's why they are able to offer spreads near to 0.1 or 0.2

Do they offer micro accounts because I’ve just started out and I want to start with a small position size initially?

Yes, they do. The minimum tradable lot size is 0.01 but I would suggest you to practice on a demo account before going on live even with a small account.

Very informative post! Tier-1 are the top liquidity pools and the brokers which get their liquidity from these pools are able to provide better trading conditions. In foreign currency trading, liquidity is important because high fx liquidity enables an easier transaction flow and makes the pricing more competitive. Top liquidity providers ensure more price stability. It is not possible for an individual trader to get direct access to tier-1 liquidity providers with a forex broker. Therefore, choose a broker that’s connected to best liquidity pools.

@clintkellycygnus Is there any broker in the list that you personally use and can recommend to a new trader? I am basically looking for lower spreads and even testing a few brokers already.

Personally I’m using coinexx, you can try them on a small account, trading conditions are good.