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The Quest For Tier 1 Liquidity

14 Jan 2021, 03:50

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Richard Elston, head of Institutional at CMC Markets, spoke to eForex magazine in September 2020 to discuss how those brokers who were struggling to gain access to the diminished pool of tier 1 liquidity providers could still compete effectively with their larger peers. Rigorous due diligence tests and high minimum order requirements mean that only the biggest players can now benefit from direct access, but a growing number of technology-based liquidity providers are moving in to fill this emerging gap.

What’s more, those LPs who can maintain a degree of internalised flow, as well as being able to use their own balance sheet to tap into Prime Broker relationships, have the potential to be offering competitive pricing with the added advantage of better than typical market depth. With that in mind, careful selection of intermediaries has never been more important, a point which is exacerbated by the evolving demands of end user clients. Recent events saw FX volatility spike significantly but with that now ebbing away, brokers need to work hard to keep clients engaged. The ability to deliver a multi asset-class offering has therefore never been more important.

Classic tier 1 liquidity may still be revered as the panacea for brokers looking to deliver a better service, but fintechs and the new genre of non-bank liquidity providers are already filling a significant role when it comes to improving market access.

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