Our main aim is to be the lowest cost provider in the Retail FX & CFD Brokerage space. It’s our mission to offer a competitive yet reliable brokerage service and, provide our global client base with the best pricing, regardless of changing market conditions.Tickmill also offers an institutional liquidity solution. We’ve designed it specifically for institutional and high-volume traders looking for easy and quick access to institutional FX and CFDs on indices and commodities. Cultivated to create exceptional conditions such as ultra-low spreads, super-fast execution, and competitive commission rates, it’s an unbeatable offering.So, Johnny, what is liquidity?Liquidity is the main element that makes any market efficient and competitive. It’s the extent to which a product or asset can be bought or sold at a stable price that reflects its real value. In simple terms, it comes down to the fact that if there are more buyers and sellers in the market, then the liquidity will be deeper.For a market to be highly liquid, there must be a substantial number of buyers and sellers. In FX, the liquidity is measured by the depth of market, the trading volume, and the Bid/Ask Spread. The quality of the liquidity correlates directly to the quality of the trading experience. Who are the Primary Liquidity Providers (LPs) in FX and what are their roles?The primary LPs in the FX market are the large investment banks and financial institutions. They are the ones willing to quote a buy and a sell price on an instrument to their counterparties. The quotes they provide are usually based on how they anticipate currency movements will take place and what they believe the counterparty might be interested in doing. They often make their money by taking the counter position in the trade rather than relying on the spread.So, it is better to work with multiple liquidity providers?Thehigher the concentration of Liquidity providers the more competitive theenvironment will be in pricing the instrument. The more liquid an asset is, thetighter and more readily available the price will be. However, having multipleLPs can have its drawbacks. The broker will need to split resources andcapital requirements, which is unwieldy and makes the business susceptible toerrors. At Tickmill we carefully select our LPs andconstantly monitor their performance based on various metrics. OK. So, what are the metrics that you monitor? Response Time / Latency Execution Speed Spread Fill Ratio Slippage Market ImpactI’d like to understand a bit more about who Tickmill’s Trading Counterparties are & the liquidity network constitute of. Can you tell us a bit more?We’re connected to a large number of Liquidity providers that include Tier1 Banks, Non-Bank Market Makers, Prime of Primes & ECN Trading Venues. Tier1 Banks Include: Barclays, JPMorgan, UBS, Deutsche Bank, Citi, Goldman Sachs, HSBCNon-Bank LPs Include: XTX Markets, HCTech, Citadel Securities, Jump TradingECN Trading Venues: 360TGTX, LMAXOur advanced order routing capabilities ensure client fulfillment even during the most volatile market fluctuations. Our highly developed liquidity networks provide intuitive, customizable pricing to facilitate superior trade transactions and reduce each client’s cost of execution. This also allows us to cater to all client types and all different kinds of trading strategies.In short, yes. To be able to get the tightest spreads, we aggregate pricing from various LPs and transmit the best bid and best ask from the aggregated pool to our clients. This will also ensure that in the case the connection with any single LP drops, there is a constant back-up that guarantees that the trading experience of the clients is not interrupted. In simple terms, slippage is the difference between the price yousaw on the screen before opening a trade and the price at which your trade gotexecuted. When you click the BUY/SELL button on your platform, you’re basicallyplacing a market order with your broker. The broker will try to get you thebest possible price in the market, but that doesn’t always mean you will getthe price you traded on. The most common reason why slippage occurs is because of an imbalance between buyers and sellers. When does this imbalance usually occur?Slippage most often occurs during periods of low liquidity (such as Market Open, Rollover Period, Holiday sessions) or very high volatility (such as major financial announcements, unexpected news, important economic events or simply during a sharp market move).It is important to mention that the size of the trade plays an important role in determining whether the clients will be filled at the price they see on the platform or will be slipped.Most platforms in the Retail FX space allow traders to see the Top of Book (ToB) price. The ToB liquidity may not be always large enough to cover a large order, that order would sweep the liquidity book and be filled on a VWAP (Volume Weighted Average Price) basis depending on the available liquidity. That’s why it’s important to trade with brokers that have solid liquidity relationships with major Liquidity providers.The same applies to trade rejections, having your trade rejected is by default an opportunity cost due to the lost opportunity. Even though it is harder to quantify it relative to slippage, it is definitely something that you should be monitoring very well. After all what’s the point of having extremely competitive spreads if the broker can’t honor them. For example on EURUSD which is the most traded FX pair (based on Tickmill Europe’s 2021 Statistics): Rejection Ratio: 0.01% At Quote / No Slippage: 82% Negative Slippage: 13% / (average -0.25 pips)
Source: Tickmill
