Some Important Information about a Liquidity Bridge for MetaTrader 4
Liquidity Bridge is a kind of software for MT4 that connects brokers’ MT4 servers with liquidity providers.
Let’s take a look at the business model where a broker passes orders to the bank or ECN and doesn’t execute anything internally. It is called STP (straight-through processing) or A-book.
Here are the quotes that the bank gives you.
You add a markup to the quotes. This markup will be your broker's profit.
In the MetraTrader 4 terminal, traders see quotes that already contain your markup.
Let’s take a look at an exaggerated example of how markups are applied to trading.
- A trader opens a trade to buy 10 lots of EURUSD for 1.10123 USD
- The markup for EURUSD is 0.00050 (5 pips)
- On your bank account, this order opens with 1.10073 USD (1.10123 + 0.00050)
The same markup will be applied to closing the trade as well. That way you will earn 50 USD twice from this trader's deal.
It doesn't matter if the trader makes a profit or loses money; you will earn money proportional to the trading volume every time.
What does Liquidity Bridge do in this scheme?
- It receives prices/quotes from the liquidity provider so the broker can show them to traders.
- It executes orders that traders make.
As you see, the bridge is an essential tool for STP brokers. Here are three questions that a broker should answer when trying to choose the best bridge solution for his company.
- Which liquidity providers do I want to connect to?
Each LP has its special features, so not every bridge can connect to any liquidity. It’s better to find out if a MT4 bridge that you are considering is integrated or can be integrated with an LP that you want to connect to.
- How do I want to pay?
There are three possible payment schemes:
-One-time payment: In the long term, this is the most economical scheme. The disadvantage is that if you want to stop using a bridge a short time after purchasing, your period of usage will be very expensive.
-Fixed monthly payments: This is a good model, especially if your trading volume is big.
-Payments according to trading volume (most often with a minimum cap). It is good that you can plan your monthly spending, but it can become too expensive in total after using it for a long period of time.
- Which functionality is important for me?
On the market, you can find all-in-one solutions that include B-book dealing, money allocation options and others, along with main bridge functions. Having so many options in a single tool sounds pretty good, but you should keep in mind that the stability of the whole system is inversely proportional to the amount of its components.
The right liquidity bridge that fits your Forex brokerage’s nuances is an essential item for an STP business. Hopefully the questions that we answered above will help you to make the right choice.