What is the liquidity supplier of foreign exchange?

In foreign exchange transactions, the importance of liquidity is self -evident. Liquidity refers to the rapid execution of a certain number of transactions at a reasonable price at a reasonable price according to the market supply and demand status. In other words, the higher the liquidity of the market, the lower the cost of real -time transactions. Generally speaking, lower trading costs means higher liquidity, or corresponding better prices. The stronger the liquidity of the foreign exchange market, the smoother the transaction, and the more competitive the quotation is.
Therefore, whether the quotation of a broker has sufficient attractiveness, whether it can provide a smooth trading environment, whether traders encounter less slippery points at the broker, which depends to a large extent on this broker depends on this broker The liquidity of the docking.
Is all know that the liquidity of retail foreign exchange brokers comes from the inter -bank market. The top -level liquidity providers are those famous international banks. Obviously, these banks will not directly connect with each broker directly. Business, this involves liquidity provider (LP). LP is a collective name for all liquidity suppliers. The literal translation is a liquidity supplier, but there are different categories and liquidity levels in LP. Of course The better the liquidity provided by the top LP. Today, let's talk about LP in the foreign exchange market.
It, from the top -level liquidity
It to figure out the liquidity supplier, the first thing to figure out is the liquidity level.
M liquidity, which needs to be paid on the same price and sells orders to form flow. The principle of liquidity will affect the cost of transaction costs. With so many people who want to buy at the same time, you can only reduce the price to find more buyers. This is the transaction loss caused by insufficient liquidity, that is, a slippery point will occur during foreign exchange transactions (of course, here refers to normal normal The reason for slippery point).
Therefore, the more lists, the larger the buy and selling, of course, the better the liquidity, the extreme situation, when everyone only wants to sell the list in the hand, the liquidity will be exhausted. The price will also fall again, the so -called flash collapse.
So the top -level liquidity is mainly from world -class large banks, mainly including Citibank, German Bank, HSBC Bank, JP Morgan Chase, UBS Group, Dutch Bank, etc. It is a quantum fund, Berlaide, etc. also enjoy the right to foreign exchange market prices). Theoretically, all orders are at these banks. How can these banks deal with?
-hedge
-
-throwing each other.
For the bank, if a certain bank accepts too many orders and holds too much net position, it is a great risk, so for example, after a bank hedge, there is still a hand in your hand. If the European and American empty orders, it will shout a price to the partners of their banks. If there is enough bank in the hand, they will pick up these orders and flatten their heads.
of course, the market cannot always be half a short and half single. These banks can not solve the part of each other, that is, the risk of the bank, which is also used to speculate profit. This part will not be used. excessive. Therefore, banks will also judge which lists are required based on their own risk control system and which lists are not needed. In the case of a certain currency, the bank will not swallow the reverse list stupidly. The liquidity will also deteriorate.
Llobbage supplier LP
It to talk about liquidity suppliers, liquidity suppliers are also divided into different levels. The closer to the level of the inter -bank foreign exchange market, the better the liquidity.
It is easy to understand from the above, multinational banks are the top -level liquidity suppliers (LP), but docking with these banks requires very high costs and very precise technologies, so there is only a small part of the strength A strong broker or liquidation bank can get this opportunity, and the service provided by top banks for them is (Prime Brokerage, the main broker business, referred to as PB business for short). Specifically, the bank is an institutional investor as an institution With other professional investors, including liquidation, delivery, settlement, custody, merger statement, financing, lending, technology and solution support, risk management, capital introduction and other fields, backstage financial services.
When large banks provide PB business for brokers, they will inspect the qualifications of brokers from all aspects of management scale, asset -liability, financial qualifications, institutional credit rating, and historical cooperation. And requiring brokers to provide huge deposits.
It here we need to mention EBS and Thomson Reuters. These two are the quotation platform between banks, integrating the liquidity of each bank and directly providing data sources. You can also get top -level liquidity directly with them, but the same as those multinational banks, their thresholds are also very high, including the need for maintenance costs, low leverage, and strict supervision.
2015 After the Swiss francs, there are fewer and fewer banks willing to provide PB business for foreign exchange brokers, and many banks have stopped this business. Although some hedge funds can provide liquidity instead of banks, they are not limited by regulatory regulation, and they cannot become providers of PB business.
Alains with the gradual evacuation of the PB business (only a few are left in the world), and the POP (Prime of Prime) business is born. Small and medium -sized brokers provide liquidity, so they have also become second -level institutions brokers. They are more common liquidity suppliers. They can integrate market quotes, grab the optimal prices to retail brokers and investors, and provide clearing services and technical support for retail brokers. They have considerable reputation and technical qualifications. Generally speaking, one or two banks will be connected, and one is usually used as a backup. Of course, there are also many liquidity suppliers who directly do cross -line through multiple connections (PB business). The liquidity of the institution is to carry out business. At present, well -known liquidity suppliers in the market include CFH, ADS, LMAX, ISPRIME, CMC, etc.
It, we take some institutions to give an example. For example, ADS can open an account (PB business) directly at the Bank of Paris BNP Paribas in Paris, France, and connects the liquidity of transnational travel; GMI is in CFH Clearing Open the account (POP) there to connect the liquidity of CFH Clearing, and CFH Clearing opens the account (PB business) at the Bank of Paris BNP Paribas and Jefferies in Paris, France.
It should be noted that the liquidity obtained by different retail brokers is also different. For example, some institutional banks will draw the fund pool as the system transaction division and general retail points. The two brokers in the same score pool may also be inconsistent with the order execution services obtained. For liquidity suppliers, the larger order and higher quality brokers are more qualified to obtain high -quality order execution. However, in the case of severe fluctuations in the market, there will still be insufficient liquidity, and even when the event that affects huge incidents, liquidity suppliers will withdraw liquidity, and there is no perfect liquidity supply in the market. This is why why is this why why is this why? Some brokers will choose to connect with multiple liquidity. Although docking many liquidity does not mean that the execution quality of the order will definitely be improved, it can prevent accidents to some extent.