Forex trading is becoming more and more popular these days. Many users are thinking about how to start a crypto exchange, and companies are thinking about how to create a crypto exchange. But for effective trading, you need to have encyclopedic knowledge and know many important terms. One of the most important is liquidity. The first thing to know is that Forex liquidity and brokerage liquidity are two different concepts.
Basic Forex Liquidity Information
Every hour, millions of different transactions with fiat currencies, crypto payments, and other transactions are made on the international currency market. The important thing is that the market does not cooperate directly with the liquidity provider. Therefore, it cannot influence large market players. Let’s take a closer look at the situation.
Let’s say a white label trading platform cooperates with several thousand users. But at the same time, the company never cooperated with a liquidity provider and closed all transactions only with the help of the current supply and demand. This means that the order book is entirely dependent on the orders placed by registered customers. So, a trader who buys 100 options at a price of 150% (for example) can get significant losses if the order book contains only 10-20 options. In this case, the asset value will be significantly higher than the market value.
The liquidity provider is a great solution to enable the white label crypto exchange to solve this problem. In this case, the brokerage company acts as an intermediary and guarantor of quality. While the liquidity provider allows you to expand the book of transactions and improve the offer at the expense of external users.
Mutual Cooperation Between Liquidity Providers and Brokers
There are several models that allow brokers to work with LPs for maximum benefit. They have fundamental differences, but they are all of the No Dealing Desk (NDD) type. Dealing Desk excludes the possibility of cooperation with liquidity providers and makes the platform market makers.
There are three main types of No Dealing Desk category:
- ECN (Electronic Communication Network). The user can place standard orders (buy/sell). The deal is executed immediately according to the current market price. But it is worth paying attention to the possibility of price slippage.
- DMA (Direct Market Access). Here, the participant in the transaction has the opportunity to act as a price giver or price taker. Liquidity providers access customer transaction information directly from the platform.
- STR (Straight-Through Processing). The purchase and sale value of the asset is generated and sent to the liquidity providers. The brokerage company transfers it the moment the client creates an order.
Most traders know how liquidity aggregator works. Moreover, they are able to choose the highest quality cryptocurrency exchange white label and start cooperating with it. But what if we are talking about brokerage companies? Which liquidity providers should you deal with?
Useful Tips for Companies Planning to Start a Cryptocurrency Exchange
Today, a large number of LPs offer their services to brokers. But only the best companies allow you to start a crypto exchange quickly and efficiently. Therefore, it is necessary to analyze the liquidity provider before deciding on cooperation. Pay attention to important features.
- Partner with Tier-1 companies. Such platforms provide maximum security and convenience and also allow you to establish communication with major banks and financial platforms.
- Pay attention to the reputation and size of the company. The more and more successful, the better. Because this way you can be sure of the quality of services. Moreover, the white label cryptocurrency exchange allows for many functional and effective solutions.
- The liquidity provider must provide quality and professional 24/7 support, accept bitcoin payments and offer additional benefits to its partners.
B2Broker is a great option in this sense. It is a reliable, popular, and quality liquidity provider using quality white label cryptocurrency exchange software. Thanks to the introduction of innovative technologies, as well as constant progress, it is the best solution for brokers looking for success.