Introduction: The Liquidity Stack
When a retail trader clicks "Buy 1 lot EUR/USD," everyone says the trade goes to "the market." But where is "the market"? Who's on the other side?
The truth is more complex than marketing implies. There's a chain of intermediaries, each taking a cut:
- Retail trader → submits order
- Retail broker → routes order (or B-books it)
- Liquidity bridge → sends to provider(s)
- Prime of Prime / Aggregator → routes to banks
- Prime Broker → faces Tier-1 banks
- Tier-1 Bank → the actual market maker
Each layer adds cost but provides access that smaller players can't get directly. Understanding this chain is essential if you want to build an A-book brokerage.
Part 1: How Forex Liquidity Actually Works
Let's start with fundamentals.
Who Makes Markets?
Forex is an OTC (over-the-counter) market. There's no central exchange. Instead, large banks and financial institutions quote prices and trade with each other:
- Tier-1 banks: JP Morgan, Deutsche Bank, Citi, UBS, Barclays, Goldman
- Tier-2 banks: Smaller banks with less volume
- Non-bank LPs: XTX Markets, Citadel, Jump Trading, Virtu
- ECNs: Currenex, Hotspot, LMAX
These entities trade $6.6 trillion per day in the interbank market. Retail flow is a tiny fraction (~5%) of total forex volume.
How Prices Are Made
LPs continuously quote two-way prices (bid and ask). When you want to buy, you hit their ask. When you want to sell, you hit their bid. The spread between bid and ask is how they make money.
Example: LP quotes EUR/USD at 1.0845 / 1.0846. You buy 1 lot at 1.0846 (the ask). If you immediately sell, you get 1.0845—losing 1 pip (the spread). That spread is LP revenue.
Why Retail Brokers Need Intermediaries
Tier-1 banks don't want to deal with small retail brokers because:
- Credit risk: Small brokers might not pay
- Operational overhead: Onboarding is expensive
- Small ticket sizes: Not worth direct relationship
- Toxic flow: Retail aggregation can be informative (bad for banks)
Solution: intermediaries (Prime of Prime, aggregators) bundle retail broker flow and present it to banks as a single, manageable counterparty.
Part 2: Liquidity Provider Tiers
Not all LPs are equal. Here's the hierarchy.
Tier 1: Banks (Inaccessible to Most)
- Who: JP Morgan, Citi, Deutsche Bank, UBS
- Minimum to access: $10M+ and Prime Broker relationship
- Spreads: 0.0-0.3 pips on majors
- For: Hedge funds, large institutions, other banks
Tier 2: Prime Brokers (Expensive)
- Who: Bank PB divisions, prime brokerage specialists
- Minimum to access: $5M-$10M capital, significant monthly volume
- Spreads: Near-interbank
- For: Large retail brokers, funds
Tier 3: Prime of Prime (Accessible)
- Who: CFH, Finalto, B2Broker, Sucden Financial
- Minimum to access: $50,000-$200,000
- Spreads: 0.2-0.8 pips
- For: Small-medium retail brokers
Tier 4: Aggregators/ECNs (Easy Access)
- Who: LMAX, Currenex, Integral
- Minimum to access: $10,000-$50,000
- Spreads: Variable, often 0.3-1.2 pips
- For: New brokers, prop firms, retail
Part 3: Prime Brokers Explained
Prime Brokers (PBs) are the gatekeepers to Tier-1 bank liquidity.
What Prime Brokers Do
- Credit intermediation: PB takes credit risk so banks don't have to
- Netting: Consolidates trades into single settlement
- Leverage: Provides margin for trading
- Back-office: Handles settlement, reporting, custody
With a PB, you can trade with 10 different banks using a single margin deposit. The PB faces each bank and takes your credit risk.
Why You (Probably) Can't Get One
PBs require:
- $5-10 million in capital
- $50-100 million monthly volume
- Regulatory license (Tier-1 jurisdiction)
- Extensive due diligence (months of onboarding)
- Ongoing compliance obligations
If you're reading this guide, you probably don't qualify. That's okay—most brokers use Prime of Prime instead.
Part 4: Prime of Prime (PoP) Explained
PoP is the practical solution for most brokers.
What PoP Does
A Prime of Prime:
- Has their own Prime Broker relationship
- Accesses Tier-1 bank liquidity
- Resells that liquidity to smaller brokers
- Takes your credit risk (with your deposit as collateral)
- Adds a markup (their revenue)
You get near-institutional pricing without needing $10M capital.
PoP Comparison (2025)
| PoP Provider | Min Deposit | Avg Spread (EUR/USD) | Commission |
|---|---|---|---|
| CFH Clearing | $100,000 | 0.2-0.4 pips | $2-3/lot |
| Finalto (prev GFG) | $100,000 | 0.3-0.5 pips | $2-4/lot |
| B2Broker | $50,000 | 0.5-0.8 pips | $3-5/lot |
| Advanced Markets | $50,000 | 0.4-0.6 pips | $3-4/lot |
| Sucden Financial | $100,000 | 0.2-0.4 pips | $2-3/lot |
PoP Red Flags
- No bank names disclosed: Real PoPs can tell you their LP names
- Unusually low deposit: Under $30,000 suggests reselling of reselling
- Fixed spreads: Real institutional liquidity has variable spreads
- No FIX connectivity: Real LPs use FIX protocol
Part 5: Liquidity Aggregation
Smart brokers don't use just one LP. They aggregate.
How Aggregation Works
An aggregator combines quotes from multiple LPs:
- Connect to 5 LPs via FIX protocol
- Receive streaming prices from each
- Build combined order book with best bid/ask
- Client order goes to best price
- Smart routing chooses optimal LP for execution
Aggregation Benefits
- Tighter spreads: Best bid from LP1, best ask from LP2
- Better fills: More depth, less slippage
- Redundancy: If one LP goes down, others cover
- Competition: LPs improve pricing to win flow
Example: Aggregated Book
| LP | Bid | Ask | Spread |
|---|---|---|---|
| Bank A | 1.08451 | 1.08457 | 0.6 pip |
| Bank B | 1.08453 | 1.08458 | 0.5 pip |
| Bank C | 1.08450 | 1.08455 | 0.5 pip |
| Aggregated | 1.08453 (Bank B) | 1.08455 (Bank C) | 0.2 pip |
Aggregation compressed the spread from 0.5-0.6 pips to 0.2 pips. Your clients get better pricing.
Part 6: Last Look Explained
The most controversial aspect of forex liquidity.
What Is Last Look?
When you submit an order, the LP has a window (typically 50-200ms) to accept or reject it. They "look" at the order before deciding.
Why LPs want it:
- Protection from latency arbitrage
- Avoid trading with "toxic" flow (informed traders)
- Time to hedge before accepting
Why brokers hate it:
- Rejection rates can hit 5-15% during volatility
- Rejections often happen when price moved in your favor
- Creates execution uncertainty
Rejection Types
- Timeout: LP didn't respond in time
- Off-quote: Price moved outside tolerance
- Reject: LP explicitly declined
No-Last-Look Providers
Some venues offer "no last look" execution:
- LMAX: Exchange model, no last look
- EBS/Hotspot: True ECN, no reject
Trade-off: Spreads may be slightly wider, but execution is guaranteed.
Part 7: Bridge Technology
A liquidity bridge connects your MT5 server to LPs. It's essential infrastructure for A-book execution.
What the Bridge Does
- Price aggregation: Combines LP feeds into unified stream
- Order routing: Sends client orders to appropriate LP
- Position management: Tracks positions with each LP
- Margin monitoring: Ensures sufficient LP margin
- Reporting: Execution statistics, fill rates, slippage
Popular Bridges
| Bridge | Monthly Cost | Setup | Notes |
|---|---|---|---|
| PrimeXM | $2,000-$5,000 | $5,000+ | Industry standard, full-featured |
| OneZero | $2,500-$6,000 | $5,000+ | Advanced routing, analytics |
| FXcubic | $1,500-$3,000 | $3,000 | Good value, solid features |
| Gold-i (Matrix) | $2,000-$4,000 | $4,000 | MT4/MT5 focused |
| FxTrusts Bridge | $1,000-$2,500 | $0 | Included with platform |
Bridge Features That Matter
- Multi-LP support: Connect 5+ providers simultaneously
- Smart order routing: Route to best price automatically
- Slippage control: Define acceptable slippage per symbol
- Failover: Automatic switchover if primary LP fails
- A/B book split: Route some orders internal, some external
- Risk management: Position limits, exposure alerts
Part 8: Real Cost Breakdown
Let's talk actual costs for A-book execution.
Startup Costs
| Item | Cost |
|---|---|
| LP Deposit (PoP) | $50,000 - $100,000 |
| Bridge Setup | $3,000 - $10,000 |
| FIX Integration | $1,000 - $5,000 |
| Testing/UAT | $1,000 - $3,000 |
| Total Startup | $55,000 - $118,000 |
Monthly Ongoing Costs
| Item | Monthly Cost |
|---|---|
| Bridge License | $1,500 - $5,000 |
| LP Minimum Volume Fee | $500 - $2,000 |
| Data/Connectivity | $500 - $1,500 |
| Colocation (if needed) | $1,000 - $3,000 |
| Total Monthly | $3,500 - $11,500 |
Variable Costs (Per Trade)
- LP commission: $2-5 per lot
- Spread cost: Built into LP pricing
- Swap pass-through: Net zero if passed to client
To make A-book profitable, you need to generate $10-15 per lot in spread markup or commission, minus the $2-5 per lot LP cost. Margin: ~$7-10 per lot.
Part 9: Choosing Providers
How to evaluate and select LPs for your brokerage.
Evaluation Criteria
- Pricing: Compare average spreads on your traded symbols
- Reject rate: Ask for historical rejection statistics
- Last look window: Shorter is better (50ms vs 200ms)
- Minimum deposit: Match your capital availability
- Minimum volume: Can you meet monthly minimums?
- Symbol coverage: Do they offer CFDs, crypto, metals you need?
- Support: 24/5 trading desk availability
- Reporting: Quality of execution reports
Negotiation Tips
- Get quotes from 3+ providers before committing
- Negotiate deposit—can often be reduced with track record
- Ask for volume-based commission tiers
- Request test period (1-3 months) before long contract
- Get last look window in writing
The FxTrusts Approach
We bundle liquidity with our brokerage platform. Pre-negotiated LP relationships, bridge included, no separate deposit required. Learn more →
Frequently Asked Questions
What is a Prime of Prime (PoP) in forex?
A PoP has a Prime Broker relationship with Tier-1 banks and redistributes that liquidity to smaller brokers who can't access PBs directly. They're the middleman between big banks and small brokers.
How much deposit do forex liquidity providers require?
PoP: $50,000-$200,000. ECN/aggregators: $10,000-$50,000. Prime Broker (direct): $10,000,000+. The deposit secures your trading margin with them.
What is last look in forex?
Last look gives the LP a brief window (usually 50-200ms) to reject your trade after you submit it. Used to avoid trading with "toxic" flow. Controversial, but standard at most LPs.
What is a liquidity bridge?
Software connecting your MT5 server to liquidity providers. Handles price aggregation, order routing, position management. Examples: PrimeXM, OneZero, FxTrusts Bridge.
How many liquidity providers do I need?
Minimum 2-3 for redundancy and competition. Optimal: 5-8 for true aggregation. More providers = better pricing but more complexity. Start with 3, optimize from there.
What is liquidity aggregation?
Combining prices from multiple LPs into a single order book. Your clients see the best bid/ask from across all providers. Better pricing than single-LP execution.
Conclusion: Liquidity Is Infrastructure
Forex liquidity isn't mysterious—it's just infrastructure. You pay to access it, just like you pay for servers, software, and support.
Key takeaways:
- PoP is the realistic option for most brokers ($50-100K deposit)
- Aggregate multiple LPs for better pricing and redundancy
- Understand last look before you see a 10% rejection rate
- Budget $3,500-$11,500/month for A-book infrastructure
- Use a proper bridge—DIY integration is expensive
At FxTrusts, we simplified liquidity access by bundling it with our platform. No separate LP deposits, no bridge fees, no complex negotiations. Whether you're A-book, B-book, or hybrid, we've got the infrastructure covered.
That's the liquidity primer. Now you know how it works—and how much it actually costs.
Need Liquidity Access?
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