This year’s Finance Magnates Pacific Summit (FMPS:24) brought together a panel of the sharpest minds in the liquidity market from leading international companies. Their wide-ranging discussion revealed crucial insights into industry dynamics, covering topics from the surge of new brokers and shifting profit models to emerging trends and success factors in the liquidity sector.
New Players in the Liquidity Market
The liquidity landscape is in flux, continuing to attract a new generation of brokers, largely driven by increasingly sophisticated trader demands. Today’s traders are more educated, well-versed in the latest products and technological advances, creating specific needs that liquidity providers (LPs) aim to fulfil. This evolving dynamic plays out differently across geographical regions and client types, with different areas showing varying preferences for particular instrument groups.
Rising brokerage firms are staking their claim, setting themselves apart through highly personalised customer service, individual approaches and bespoke offerings. Industry insiders agree: to justify their place in this ecosystem, brokers must distinguish themselves via unique technological capabilities, specialised market niches or unparalleled customer experience. Yet, the greatest challenge for new players is building a reliable client base and establishing trust in the market.
Grow Profit as a Broker
Profitability remains a critical concern as the liquidity market is witnessing an unprecedented influx of new entrants who must compete with major industry players. With significant market saturation, it has become really challenging for newcomers to carve out sustainable profit margins in an already competitive space. While diversification strategies, such as combining B2C and B2B offerings, present opportunities for revenue growth, success ultimately hinges on providing stable technological solutions, no unexpected breaks in instrument quoting, effective order execution, good trading conditions, as well as competitiveness.
Both industry expertise and sophisticated liquidity management practices are essential, as firms with deep know-how typically enjoy longer business lifecycles and sustained profitability. As the market matures, those with strong operational foundations will emerge as leaders, while entities lacking these fundamentals may struggle to stay afloat.
How Brokers and Liquidity Providers Work Together
A major concern in the liquidity ecosystem is managing challenging or toxic flows from clients. Industry experts argue it can only be tackled through transparent, open communication between brokers and liquidity providers, allowing both parties to address problematic trading behaviours before they escalate.
“The number one thing is communication between LPs and brokers. Brokers know the client, so at the end of the day, you need to consult them on how to handle your job and provide a proper, complete analysis,” says Andreas Kapsos, CEO at Match-Prime Liquidity. Additionally, brokers often request investigation details from LPs to support their decision to reject the flow.
Indeed, collaborative dialogue between liquidity providers and brokers becomes a central pillar for navigating challenges. Yet, successful management strategies go beyond just communication, also involving regular, meticulous flow checking and diversification across instruments. While brokers naturally aim to accommodate client needs, it’s crucial to operate within logical market conditions to maintain market integrity.
The Future of Liquidity: Global Trends
The industry is witnessing several emerging trends worth keeping a close eye on. Take the share trading arena, for instance. While liquidity remains limited, Andreas Kapsos notes growing marketing interest, particularly from South Africa. “We have a competitive offer with a wide range of instruments, including stocks. If a client is interested in something more unusual or exotic that suits the local market, LPs will find the best possible source and provide quotes.”
Cryptocurrencies have established themselves as the clear frontrunner in new focus areas. In response to sustained client demand, Match-Prime Liquidity offers crypto CFDs to meet this ongoing need. “Just recently, we published an article highlighting our enhanced crypto liquidity offering and noticed a strong reaction from the market. While clients knew about our existing crypto CFD offer, this renewed focus has gained particular traction,” Match-Prime Liquidity’s CEO adds. Over the next quarter, the company will closely monitor crypto performance to see if it follows patterns similar to traditional shares.
There’s also a strong demand for gold liquidity, driven by various global economic factors. With ongoing international conflicts, instability and rising inflation, gold serves as a key risk hedge, pushing prices to new highs. This phenomenon resonates strongly around the world, including the Dubai market, where gold stands among the most actively traded assets.
Strategies for Liquidity Providers
When it comes to staying ahead in the game, LPs must prioritise strengthening their human capital. “Our main focus should be on developing exceptional, knowledgeable employees who are driven to grow. With our team now exceeding 250 people globally, I’m convinced that excelling at the human side of our business is our secret weapon. The way I see it, if we can get this right, it will give us a major competitive advantage,” says Andreas Kapsos. By attracting and retaining top talent, firms can better anticipate industry trends and deliver superior client service. To remain attractive as a liquidity provider, equally important is drawing insights from reputable industry sources and closely tracking competitors’ offerings and pricing strategies.
From a technical perspective, understanding toxic flows makes it much easier for expert teams to develop efficient defences against market disruption. An essential benefit for LPs is providing clients with user-friendly technology that simplifies risk management while remaining vigilant against unfair trading practices. Additionally, client support can’t be underestimated, with the leading LPs offering round-the-clock assistance for all types of issues.
A Closer Look at Liquidity
What is the key to success in the liquidity landscape of the future? As the market grows increasingly competitive, established LPs must continually transform to maintain their advantage. According to the FMPS:24 panellists, those poised to lead in this new era must master a powerful combination of transparent communication, deep expertise and advanced technology.
Want to learn more from top liquidity experts? Check out the full panel session.
