Liquidity Bridge Types

Liquidity Bridge Types

Liquidity Bridge offers traders direct access to the worldwide banking market using an electronic trading platform comparable to MetaTrader 5, which permits direct market access via software. In contrast, to direct order transmission from an individual trader to liquidity providers such as significant brokers, banks, and other financial institutions, this platform is intended to organize trading between a broker and a customer. 

The liquidity bridge, which uses end-to-end processing technology, enables traders to obtain prices and liquidity without requiring considerable interaction from their brokers. It is critical to differentiate between two kinds of liquidity bridges, which correspond to ECN and STP technologies. On the one hand, the broker can deliver higher-quality deals; on the other, they can lower their risks.

Let’s look deeper at the two kinds of liquidity bridges now used by brokers.

Liquidity Bridge STP

Straight Through Processing (STP) enables a direct connection between brokerage companies and banks that trade directly on the interbank market, allowing customers’ orders to be executed immediately by liquidity providers – banks. Most traders find this method particularly interesting because of the availability of real-time marketplaces and the potential of quick execution without the participation of a dealer. When there are more liquidity sources accessible, clients benefit from greater execution. 

STP-based liquidity bridges provide direct communication between customers and liquidity providers. Providers often combine many sources of liquidity, resulting in improved liquidity and cheaper pricing. Under the STP system, you may select between a floating and a fixed spread. While big banks normally supply the majority of liquidity, they typically charge a predetermined spread. An aggregator with access to all buy and sell bids may pick the best price. It may sometimes result in a spread of zero or even negative values.

Liquidity Bridge on the ECN

Because of the growing popularity of trading among private traders and the improved transparency, ECN, which allows all traders (not only market makers) to place orders on the market, is immensely progressive. Customers from all over the globe may be linked through ECN liquidity bridges, which significantly increase total turnover, encourage round-the-clock trading, and improve liquidity, resulting in faster execution times and spreads. Furthermore, the ECN system serves as the counterparty to all transactions.

ECN networks are considered alternative trading systems since they do not utilize market makers from exchanges or OTC marketplaces. Most ECN orders are limit orders with predefined transaction prices, which may be partly or completely executed after hours.