Foreign exchange is a complicated financial matter, with plenty of litigation and banking rules surrounding it. While it can be a way to make a financially viable living with a little training and a lot of ambition, being a trader and being a broker are two very different things.
For traders, the biggest question is finding the perfect platform and brokerage to begin with. From there, it’s just a matter of hard work. For brokers, there’s more – from designing a service that can intrigue and capture new traders, to offering a way for traders to do what they really want to do – make more money – while satisfying the many regulations that keep the Forex market honest.
Among these many different little innovations that brokers must make to be appealing to their traders, one of the bigger ones is offering a proper channel to a liquidity provider.
What is a Liquidity Provider?
A liquidity provider is an institution that acts as the buyer and seller of a certain asset – foreign currency in this case – and as such, they provide an easy way for traders to buy and sell. Liquidity providers, or market makers, are found in other financial sectors and trading sectors, but here in Forex they’re a popular way for traders to ensure that they’re really making money.
The biggest and most popular liquidity providers are investment banks. Really, really big investment banks. These are called Tier 1 liquidity providers, and they’re what traders want to work with.
They won’t, of course, unless they’ve got some serious capital. That’s where you as a broker come in. Through connections to one or another Tier 1 liquidity provider, you can help your traders make their money on the Forex market while you score your commission per trade, or membership fee. That’s the basic business model.
But there are some obstacles. Namely, Forex platforms like MetaTrader 4 require a bridge in order to connect liquidity providers to traders. Such Forex bridge solutions are often third-party addons through companies like FXBS. Through FXBS addons, you as a broker make sure that traders can safely make money with a reputable liquidity provider.
Some brokers forego this, and simply operate a dealing desk – becoming market makers themselves. However, many commercial retail traders and expert traders advise others to stick the classic STP or ECN brokerage model, and stay away from market makers unless they specifically have an outstanding reputation. That makes it important for you, as an ambitious broker, to choose a quality product among the available Forex bridge solutions to truly stand out from the rest of your competition.
Choosing Your Bridge