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How Retail Brokers Can Up Their Liquidity Management Game

Are you a retail FX broker who has accumulated experience and entered a period of rapid growth?

If you're not doing so already, diversifying your liquidity management is one of the simplest, yet effective ways to scale up and grow a brokerage. But why is this necessary?

In the current FX environment, the most basic business can and is struggling to satisfy the appetite of their end customers. It's no secret that retail traders are becoming harder to please, for example, those looking to trade new and exciting asset classes such as the growing cryptos market.

That’s where you come in. Now is the perfect time to investigate how you can diversify your offering to attract more clients and increase trading activity, as new tricks are necessary to remain competitive and keep winning more business.

There is a big demand from clients who are desperate to be able to trade multi-asset markets easily, using only one solution - one broker. If they can’t get access to the asset classes they want through your business, then they will most probably be on the lookout for another provider that meets their needs.

How does becoming multi-asset help grow your brokerage?

As mentioned above and in Tom’s previous blog, giving traders the capability to invest in multiple asset classes is a great way to diversify and grow your brokerage. Therefore, to do this, you will need to be able to consume liquidity from multiple providers. Increasing the number of liquidity providers helps you differentiate your offering whilst giving tighter spreads, allowing you to aggregate feeds to obtain a Best Bid or Offer. By doing so, you will benefit from better pricing across the larger asset class ranges – as Tom always says, LPs “are not all good at everything”.

 

How many Liquidity Providers should you select? 

There isn’t a definitive answer as it depends massively on your strategy. However, the most important consideration is for you to match your liquidity providers to the specific requirements of your brokerage – e.g. selecting specialist liquidity providers for each individual market (FX, cryptocurrencies and CFDs) as, for example, some liquidity providers may have better prices on metals, whereas others could focus on major asset classes or exotics. Brokers need to be able to switch liquidity providers seamlessly and create customized liquidity for an ever-changing torrent of market events.

Annoyingly for smaller brokers, gaining this multi-asset liquidity is harder to do because of the bigger multi-asset LP's who have been much slower to offer FIX connectivity to their full range of markets - which is a far cry away from purely FX LP's who fall over themselves to take a broker’s trades.

But fear not!

Brokers no longer need to rely on direct LP connectivity to distribute liquidity globally. There are reliable technology solutions on the market for you to take advantage of who already have partnerships with a vast range of liquidity providers that offer access to high quality, competitively priced liquidity across multiple asset classes.

This is where we can help.

Gold-i’s Matrix is used by leading liquidity providers and Prime of Prime brokers to distribute liquidity globally. The multi-asset platform enables retail brokers to aggregate multiple pools of liquidity, mark up the spreads, and stream their own liquidity to a trading platform or other financial entity, with an easy and efficient system configuration.

Key benefits include:

  • Aggregate multi-asset liquidity feeds including FX, CFDs, and Cryptocurrencies
  • Easily monitor liquidity providers' pricing and expanding to see market depth
  • Automatic Fail-Over/ Fail-Back With or Without Aggregation
  • Minimise Slippage and Downtime
  • Use Matrix Insights to analyse order routing and report execution statistics, such as slippage, latency, fill quantity

Find out more about our Gold-i Matrix and other liquidity management solutions here.

 

Get in touch today to receive a free demo and trial of our unique Gold-i Matrix solution or to gain further expert advice on how to grow your FX brokerage. 

About the author

Gold-i

Gold-i

Gold-i is a global market leader in trading technology, helping hundreds of multi-asset brokers to transform their trading operations with robust liquidity management solutions, award-winning MetaTrader Plug-ins, business intelligence tools and all with the best support in the industry. Gold-i has won over 20 trade awards in recognition of its innovative products, commercial success and future potential, including a prestigious Queen’s Award for Enterprise 2014. Has been recognised as one of the most influential Fintechs in 2018 and 2019.