Make or Break Decision: Finding the Liquidity Provider Thats Best for You

INFINOX's Jay Mawji details IX Prime's multi-asset liquidity solutions offering and his perspective on the industry at large.

New brokers face multiple challenges but when it comes to their liquidity provider, “less is more”.

Finding access to a number of pools of liquidity while only managing one relationship can be a strong advantage to any broker, new and old.

With a strong relationship, a broker will be able to build the foundations to service their clients and continue to develop their technology and liquidity.

Finance Magnates spoke with Jay Mawji, Managing Director at INFINOX, who details IX Prime‘s multi-asset liquidity solutions offering and his perspective on the industry at large.

Jay Mawji, Managing Director at INFINOX
Jay Mawji, Managing Director at INFINOX

Newer brokers face a wide range of challenges. Is it better to focus on one liquidity provider or multiple ones?

The simple answer is “less is more”. Not just for new brokers, but for many brokers, there are multiple aspects of their business to concentrate.

Managing liquidity relationships with multiple providers and posting margin with multiple brokers can become quite an arduous task. Finding a liquidity provider that can access liquidity from a number of other providers, delivered in one relationship can be a strong advantage.

Through this relationship, a broker can access “whole of market”; selecting the right combination of tight pricing and quality of execution.

Most importantly, especially for brokers looking to grow their business is the relationship with their liquidity provider.

A personal relationship brings out competitive advantages, shared experience and a premium service that can be delivered to the end client; which is the most important quality clients are looking for. You can’t underestimate the power of relationships.

Can you describe the process by which brokers secure liquidity providers and the importance of this decision?

The typical process would be to approach a provider. Answer mundane questions on your flow, what your clients trade. If the Liquidity provider views you as a potentially profitable client, you will receive an ‘out of the box’ commercial offer.

After completing a mountain of paperwork, you will be sent a set of documents for connection and email address if you have questions (which you will).

A poor experience for your second most important relationship (your first being your client).

An alternative route is to have a dialogue with a liquidity provider. Discuss your business, your client base, your objectives. Understand what the liquidity provider can offer but more importantly how they will be able to work with you.

If you can establish this relationship, the paperwork is easy (but essential). Your liquidity provider should be able to help you connect to them, walk you through testing and be responsive from the outset.

The relationship and the commercial agreement become the foundation of a strong relationship with your new partner. 

What attributes do the best liquidity providers have and which of these are the most important for brokers?

Relationships, technology, pricing, and execution. While the order of the last three can be debated, a liquidity provider that builds strong relationships with brokers is one of the greatest advantages a broker can have.

With a strong relationship, a broker will be able to build the foundations to service their clients and continue to develop their technology and liquidity.

This in turn will give them the tools to compete in a very competitive market.

Working with a Liquidity Provider that has robust infrastructure is always important, it’s the pillar upon which reliability is built.

This should come with a host of trading tools to allow the broker to understand the orders their clients are placing, the quality of the execution with their LP and the analytics to identify where improvements can be made.

Access to multiple pools of liquidity and competitive pricing that brokers expect from a liquidity provider is another important attribute.

The advantage of using a single provider that has access to multiple liquidity pools is not being reliant on one single liquidity source.

If there is an issue with one, another provider can be used and no impact is passed onto the end client. 

How long does it take for brokers to secure liquidity from reliable venues? Is this a lengthy process?

Getting started should be easy, however, traditionally the process has been arduous and time consuming. Back and forth with a provider that doesn’t value relationships can take months before a broker can access liquidity.

The paperwork, especially for new brokers, can be a slow process without any help and pointers.

Using a liquidity provider that opens direct communication on first contact speeds up the brokers access to liquidity.

By discussing and understanding their exact requirements and understanding how the liquidity provider can help, brokers can secure liquidity in less than a week (we have set some clients up in 2 days where communication was fluid!).

It certainly helps to work with a Liquidity provider that has dedicated teams and operates on technology that is specialised on integration.

What are some ways that global trading infrastructure can improve this year and beyond?

Trading Data is increasingly a golden resource across all business. Financial services are no different. Trading infrastructure already uses data but the race to exploit it has only just started.

Improving the mining and collection techniques and increasing the amount of analytics will lead to improved utilization of data. This will see accelerated product and service development, business efficiency and a more competitive landscape.

Global trading infrastructure could use this to improve several aspects, including regulation technology, trading tools and management.

In regards to regulation technology, these improvements will help to prevent and protect against fraud, as well as boost compliance and risk management systems.

Trading tools will also see improvements to help clients pick their trades wisely, manage trade lifecycle, and analyse performance.

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