In early October 2021, Lehman Capital conducted a questionnaire survey on different types of financial practitioners such as fund companies, stock brokers and foreign exchange trading institutions around the world. The survey results reveal that more and more financial traders begin to pursue a better trading experience actively. In order to better serve the market and meet the growing trading needs of the traders, “liquidity provider” began to enter the vision of many financial traders.
What is liquidity?
We all know that the market will form liquidity only when there are buying and selling orders at the same price, and liquidity can affect the transaction cost directly.
For example, Mr. Brown has thrown out a lot of orders at one price, but there are not so many people who want to buy his order at this price in the market. Mr. Brown can only reduce the price to look for more buyers, which process is the transaction loss caused by insufficient liquidity.
1. What is the liquidity provider (LP)?
The abbreviation of liquidity provider is referred to as LP (Liquidity Provider). In many cases, LP is a visible but untouchable existence for many financial traders.
As we all know, the trading level among the markets can be divided into three levels: the first level is the major multinational banks LP, investment banks LP and large non-banks LP; the second level is the ordinary retail trading platforms; the third level is individual retail investors and institutional investors.
Some well-known global monetary banks are the top liquidity providers, but docking with these banks requires very sophisticated technology and very high cost, therefore only a small number of powerful brokers or clearing banks can get this opportunity. For example Lehman Capital and other brokers, clearing institutions and the exchanges with PB business cooperation with banks, they will provide liquidity for small and medium-sized brokers, so they are also called secondary institutional broker, in addition more common non-bank LPs.
2. What does LP do?
LP can integrate market quotations, capture the best prices and pass them to the retail brokers and the investors, as well as provide clearing services and technical support for the retail brokers.
When providing PB business for brokers, large banks will investigate the qualifications of the brokers from various aspects such as management scale, assets and liabilities, financial qualification, institutional credit rating and historical cooperation relationship, so as to measure the risks of the brokers and require brokers to provide huge guarantee funds.
It should also be noted that different retail brokers obtain different liquidity even for the same liquidity provider. For example, some institutional banks will divide the capital pool into system transaction sub pool and general retail sub pool. The order execution services obtained by two brokers in the same sub pool may also be inconsistent.
For liquidity providers, it is natural that brokers with larger orders and higher quality are more qualified to obtain high-quality order execution. For example, the LP of Lehman Capital, which is directly connected with the bank trading system, has a quotation depth of more than 20 layers and ranks among the best in the same industry.
3. LP One-stop Solution
An excellent LP can provide the traders with one-stop solution such as inter system bridging, high-frequency quotation engine, powerful trading system, inter-bank technology and visual backstage.
One-stop solution of Lehman Capital includes but is not limited to the following six types of LP services:
(1) Inter System Bridging of LEHMAN Link
Lehman Capital supports high extensibility docking of multiple trading systems. The institutions can dock the systems according to their needs to realize system diversification. Intelligent order routing, custom matching rules and seamless connection between systems easily support more than 1000 concurrent order processing.
(2) Quotation Engine of LEHMAN
Lehman Capital provides institutional customers with higher frequency continuous transaction quotations, with more than 20 inter-banks bid and ask price updates per second. In high-frequency trading, the customers can better grasp the pulse of the market and insight into opportunities.
(3) Trading System of LEHMAN Trader Pro
LEHMAN Trader Pro integrates bank connection, quotation aggregation, trading and risk control tools, so that the banks, the fund companies and the securities companies can directly connect to the inter-bank market, and improve transaction fluency and reduce transaction costs.
(4) Colocation of LEHMAN Cloud
LEHMAN provides all the organizations with all-round protection and enterprise-level colocation, as well as the high-performance transaction host and stable low latency dedicated network services. The computer rooms in New York, London, Hong Kong, Tokyo, Moscow and other places and the optical cable and satellite signal transmission systems around the world are all under systematical deployment. The cross-linking of Equinix data center, the exchange and the bank ensures extremely high availability.
(5) Inter-bank Technology of LEHMAN
LEHMAN provides all the organizations with transparent, efficient and stable market-link technology which directly connected to over 50 top banks of the world, ECN systems, securities companies and hedge funds, meanwhile matches the transactions according to time priority and price priority.
(6) Report Backstage of LEHMAN
The report backstage of LEHMAN brings the institutional customers with real-time and reliable information and visual data on the aspects audit, risk and compliance, so that the institutional customers can optimize business processes, better prevent risks and improve benefits.