When the SNB event happened, the risk appetite for large Liquidity Providers changed in a matter of seconds. It is only very recently, now that the dust has settled, that the new landscape of liquidity provision is becoming clear.
Large players like CitiFX Pro have exited the business and many new, smaller liquidity providers such as hedge funds have entered the market. This has caused a fragmentation of liquidity provision. Where brokers previously selected one large Liquidity Provider, for example, they may now opt for liquidity from four or five smaller players.
Digitex Futures Partners with ChainlinkGo to article >>
Whilst this rising number of Liquidity Providers creates advantages for brokers – such as more competition resulting in better spreads and lower costs – there are also increased complexities for brokers wanting to use liquidity from more than once source. Furthermore, there’s the added complication that multi-asset liquidity is now spread across multiple liquidity providers. Now more than ever, brokers need the right technology partner to help them to manage their liquidity effectively.
Technology providers such as Gold-i have seen a huge increase in development requirements to build new Liquidity Provider feeds. They have integrated with an additional 15 Liquidity Providers this year which are all now available for brokers to choose from. If brokers are looking for a technology provider, it’s important they find out which of the original and which of the new breed of Liquidity Providers have been integrated. Ultimately, if brokers choose the right technology vendor, they can really take advantage of the current explosion of Liquidity Providers.