Finding a Regulated Liquidity Provider – Top Criteria to Look for

Liquidity is critical in financial trading, mainly concerning exchanges and brokerage firms. In fact, it works like the backbone of trading markets and is the most crucial factor behind supply, stability, and efficiency. 

Brokerage firms and institutional investors always look to find and supply the deepest and largest liquidity to their traders, assisting them in executing market orders quickly and efficiently. However, finding a reliable liquidity partner is a common challenge for brokers because they must consider various factors and look for certain qualities. 

Defining Liquidity Providers?

Liquidity is the availability of financial instruments and market traders, which makes order execution much faster and more seamless. When the liquidity is high, assets become highly supplied, and their trading fees and slippage rates become lower.

Supplying liquidity is usually conducted by financial corporations, central banks, large hedge funds and other market makers who continuously engage in trading activities to grow their wealth and make trading assets more available. 

Thus, other market participants can execute orders at prices near the real market value (low slippage) and minimise the divergence between asking and bidding prices (tight spread). These activities make financial markets more efficient and attract more participants to trading.

On the other hand, markets with low liquidity levels usually suffer higher slippage rates because assets are not sufficiently supplied, and there is a lack of pending transactions in the order book that matches the trader’s request. This slight delay makes the trade happen at a slightly different price, which can highly affect the trader’s plan and profitability.

Moreover, when supply levels are low, the difference between buying and selling prices increases because the asset becomes more scarce and matching orders prioritise the one with the highest bid. Therefore, an increased spread range makes transactions more costly.

Why Use a Regulated Liquidity Provider?

Liquidity providers supply brokerage firms with trading instruments and access to the market, allowing them to offer a wide range of investments and options to the end users. 

However, finding a regulated provider is a challenge for most brokerage firms because LPs have different qualities regarding execution rates and availability, regardless of flow changes and liquidity requirements. Therefore, brokerage firms look for regulated LPs who have these features.


Regulated liquidity providers encompass valid experience and knowledge of trading markets. Thus, the provider can tell which markets have higher demands and manage their assets and markets more efficiently. 

Reliable LPs offer knowledge from internal connections and networks, such as hedge funds and central banks, providing brokerage firms with crucial information and updates about the market that can highly affect their business and service offerings.

Therefore, finding a highly regulated liquidity provider can work similarly to a financial advisor who provides critical market predictions and analysis, offering the best way to manage liquidity and ensure a stable flow to the end user.


Finding a liquidity provider with valid regulatory requirements is crucial to safeguard your business from engaging in illegal activities. Regulated LPs obtain financial conduct licences that ensure they offer legal services to their customers. 

When you work with a regulated provider, you ensure full compliance with laws and regulations that safeguard your funds and clients’ investments. 

Moreover, licenced liquidity partners are aware of regulatory frameworks and practices and may help you adopt best practices that apply to certain jurisdictions and local laws.


Liquidity providers offer different pricing plans for their services, including deep liquidity levels and other financial services. Therefore, their prices can be flexible according to the business requirements, especially for startups that have limited budgets.

Moreover, offering prices that are “too good to be true” becomes more reliable with regulated liquidity providers because there are very small chances that these prices are manipulative or engaged in scam schemes.

Final Thoughts

Liquidity providers are key players in financial trading, offering market access to brokers and other market participants. Finding a regulated and reliable liquidity company can be challenging. 

Therefore, ensure thorough market research and look for an LP with reliable experience, regulated practices, and affordable prices.