A Liquidity Provider offers the necessary market liquidity to enable trading of financial instruments like currencies, stocks, or commodities. When a prop trading firm uses a Liquidity Provider, the firm is accessing deep liquidity pools for executing trades, which allows high-frequency trading, large volume trades, and managing slippage. The large pool of liquidity typically comes from major banks, financial institutions, or other market participants. This arrangement allows the prop firm to execute large trade orders efficiently and at competitive prices, without significantly impacting the market price of the asset being traded. An LP broker facilitates the execution of trades by matching buy and sell orders. By providing liquidity, these brokers ensure smoother price movements and more stable trading environments, often resulting in tighter spreads and efficient trade execution. The compilation below showcases prop firms that have integrated a liquidity provider into their framework:
