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Why You Need to Switch Your Liquidity Provider?

Blog | 08 Jan 2021 12:00/AM GMT

The Covid-19 outbreak in late February last year significantly triggered volatility and liquidity squeezes. 


Since then, market liquidity has improved noticeably. Liquidity such as in the forex markets must be integrated as a key dimension in the portfolio construction process, as it’s the third pillar in addition to risk and returns.  


Moving into 2021, to provide continuous access and resilient liquidity, institutional or retail investors may ensure the best mix of connectivity to liquidity venues and relationships with counterparties.  


Taking that into consideration, switching the liquidity provider (LP) is seems to have worked fine for forex market participants. However, before changing the LP, you need to continuously evaluate your business relationships and analyse the returns and service quality being offered to you. 


Here, we help you to explore some of the common reasons that could prompt you to consider before changing your LP. 

1) To Reduce Costs  

Commission or spread expenses are correlated with the performance (average executable spread, slippage, rejection ratio) and a good LP will offer tighter spreads across all markets, with consistency. They will process withdrawal and sales requests within the given timeframe. 


Doo Clearing for example comes with strong bargaining power with upper stream liquidity providers. Doo Clearing aggregate prices across numbers of tier-one bank liquidity providers, for a fully aggregated market depth, to create a more competitive environment for global market participators. 


2) Poor Technology  

Technology can offer a competitive advantage and will seriously advance your trading performance. If the technology is poor, it will have a direct impact on the overall LP performance. It is best if you can look for LP that can provide superior technology and a highly scalable electronic communication protocol, such as FIX API. In the forex market, the success stories are attributed to newer technologies.  


Additionally, in recent years, the evolution of exclusive digital markets has driven the need for real-time price discoveries, instant executions, and low-latency systems. 


Doo Clearing is partnered with a global leading financial services provider – Doo Holding Group. By teaming up with solid IT infrastructure, Doo Clearing strives to complete orders as close to a buy-sell stop as possible, to assist in good execution, dependent on market conditions.  


With Doo Clearing, the market participants should be able to get the software implemented within half an hour, such as FIX API 4.4, MT4 Bridge, and MT5 Gateway, to get full distribution capacity.  


3) Inconsistent and Unreliable Services 

A good market-maker will have the ability to make a two-way price during periods of extreme volatility. For LP, it should offer 24-hour technical support, along with real-time trade and position monitoring. This includes rapid connectivity through seamless bridge integration, for 100% STP execution and minimal slippage. The company should have strong relationships with banks, non-banking financial services providers, and ECNs.  


Doo Clearing’s high-performance liquidity tools maintain stability and avoid downtime or spikes almost entirely with an automated and robust system of reporting to enable them to comply with regulatory requirements. The health indicators in real-time monitoring your clearing system, customer connectivity, trade flow, and execution quality.  


4) Multi-Asset Liquidity 

The financial markets have been constantly expanding over the years and the range of instruments available for trading is not limited to major currency pairs. Therefore, make sure your current LP is not restricting you to only these.  


Doo Clearing provides institutional clients with one-stop clearing solutions for all kinds of trading products such as Securities, Futures, Forex, Commodities, CFDs on stocks, CFDs on futures, CFDs on spot indices, etc.   


5) Increased Transparency 

Before you opt in to a new LP, always remember to check the clarity in the way they conduct business. They should give you an insight into how pricing models are calculated and careful analysis and reporting of their risk management process. The financial markets are evolving in terms of regulatory guidelines and LP have to maintain a strict code of ethical standards and conduct, in terms of how they offer services to clients. 


At Doo Clearing we consider transparency as the absolute quality for LP. We earn clients’ and regulators’ trust by being as transparent as we can. Within the guidelines of privacy, as well as the law. 

About Doo Clearing  

Doo Clearing is a UK-based spot forex and CFD liquidity provider that incorporates advanced and strategic clearing systems to provide qualified professional clients and financial institutions with unparalleled clearing services that connect the world’s top liquidity.  


Doo Clearing Limited is a legal entity registered in the UK and holds a regulatory licence issued by the UK Financial Conduct Authority (registration number 833414).  


To get started, contact Doo Clearing’s Specialist team today for an insightful preview of how we can bring your brokerage to the next level.  


London Office  

Email: [email protected]  

Website: www.dooclearing.co.uk  


Hong Kong Office  

Email: [email protected]  

Website: www.dooclearing.com