cTrader Liquidity Explained

December 20, 2019

Introduction to cTrader Liquidity

cTrader was designed as a straight-through processing (STP) forex trading platform. cTrader was one of the first STP forex trading platforms available for retail traders. When it was first released in 2011, it wasn’t even possible to trade mini lots (10,000 currency unity) or micro lots (1,000 currency units).

The smallest order you could place was 60,000. The reason is that banks weren’t interested in processing such small orders. In fact, most over-the-counter FX desks at banks wouldn’t process orders less than 1 million. This meant that most brokers were collecting and manually hedging many small orders, essentially operating a dealing desk.

In the first decade of the 21st century, online forex trading exploded. It became more accessible and more attractive to retail traders. As traders started to get more experienced, there was a demand for a real STP trading environment. MetaTrader 4 simply wasn’t up to the job of being a real STP platform. Luckily, cTrader came along with native support for Direct Market Access to Liquidity Providers via FIX API.

There was still the problem of banks not accepting smaller order sizes. Luckily, new business models and technologies solved this issue. Prime Brokers, such as IS Prime, who recently integrated with cTrader, could use order aggregation technology to collect orders from dozens of brokers, net them off and forward bigger orders to a bank. This essentially created a new business, forex liquidity providers.

Forex Liquidity Providers

Forex Liquidity Providers come in a few formats. First, you have banks; then you have Prime Brokers; then prime of prime brokers and ECN venues. A typical retail forex broker doesn’t trade directly with a bank. Banks have very high requirements. Your forex broker probably gets liquidity from a Prime Broker, Prime of Prime or an ECN.

Prime Broker Liquidity Providers are usually very large firms that trade directly with banks. Their clients are large forex brokers, hedge funds or algo traders.

Prime of Prime Broker’s are the most common type of Liquidity Provider that forex brokers will cooperate with. They accept lower order sizes and have lower minimum deposit requirements.

Electronic communication venues are used by everyone. Generally speaking, it’s like an exchange. Participants place orders, go into the book and are filled if a participant on the other side wants to buy what they are selling. ECNs are generally very economical because there is no middleman, such as a broker charging a spread or at risk of losing money from market volatility. The venue simply charges a commission on all the trades for using the technology.

Who are the cTrader Liquidity Providers

cTrader is integrated with a number of forex liquidity providers. Brokers that white label the cTrader platform have their own installation. This means brokers choose which LPs are connected to their cTrader platform. This is why each broker can have different prices, market depth and trading instruments.

Theoretically, any forex LP can be integrated with cTrader. This is only possible because most businesses and technologies involved in FX use the FIX API standard. Spotware doesn’t choose which LPs to connect with. Rather it’s the brokers using the LP that make requests and demands for new partners to be integrated.

cTrader is integrated with a number of liquidity providers, such as Swissquote, Advanced Markets, Sucden Financial and many more.

cTrader and other STP Trading Platforms

Even today, there are not many STP trading platforms on the market. The competitive landscape for trading platform vendors is very thin. Over the years there have been many attempts to break into the platform provider space but it’s only really cTrader that managed to survive while MetaQuotes dominated the sector. In fact, MetaTrader 4 couldn’t actually be qualified as an STP trading platform since it uses third party bridges to connect to external counterparties to submit orders.

Which cTrader Broker has the Best Liquidity?

Every broker can have a slightly different configuration of liquidity providers, and there are so many providers on the market. Generally speaking, the larger the broker, the better the liquidity. That’s because larger brokers have more buying power to influence conditions, and as more valuable client, they and, by extension, their clients get treated with better service. However, large brokers can be very risky to LPs when things change, such as big economic events that can dramatically influence the market. Indeed, LPs need to manage those risks, possibly by sending thin quotes and bad prices, which can cause very bad slippage to clients.

Generally speaking, any of the mainstream cTrader brokers will have high-quality liquidity providers streaming into their trading platforms. There is never a guarantee that you won’t get slipped or that orders will always get filled. At least with regulated brokers with a strong reputation to take care of, you know that in case something does go wrong, they will try to put it right. Consider reviewing these brokers;