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What is liquidity aggregation and how does it make the market cleaner?

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Liquidity aggregation

One of the important processes in the forex market is liquidity aggregation. Let’s review what it is, its key tasks and discuss market manipulation when no aggregation options are available.

What is liquidity aggregation in brief  

Liquidity aggregation is a process that enables forex brokers to access liquidity from multiple sources, including banks, market makers, and other liquidity providers, and consolidate it into a single pool. This allows brokers to offer their clients better pricing, tighter spreads, and faster execution speeds. The better liquidity aggregation the broker has, the more profitable his business is. 

Liquidity aggregation typically involves using a technology platform that can connect to multiple liquidity providers and consolidate their prices into a single feed. This feed is then used to execute client trades, with the broker selecting the best available price at any given moment. The platform may also include risk management tools to help brokers manage their exposure and ensure they have sufficient funds to cover client trades.

Key tasks of liquidity aggregation

  • Consolidating liquidity. The primary task of liquidity aggregation is to consolidate liquidity from multiple sources such as banks, ECNs (Electronic Communication Networks), and other liquidity providers into a single pool. This allows traders to access a large number of liquidity providers through a single platform.
  • Better pricing. By accessing multiple liquidity providers, brokers can offer their clients more competitive pricing, with tighter spreads and lower commissions.
  • Faster execution. Liquidity aggregation allows forex brokers to access faster execution speeds, reducing the likelihood of slippage and ensuring client orders are filled at the best available price.
  • Increased liquidity. Liquidity aggregation allows forex brokers to access deeper liquidity pools, reducing the risk of order rejection and ensuring that clients can execute trades even in volatile market conditions.
  • Improved risk management. By consolidating liquidity from multiple sources, brokerages can manage their exposure more effectively, reducing the risk of significant losses.
  • Reporting and analysis. Liquidity aggregation platforms provide detailed reporting and analysis tools to help traders monitor their performance, track their trades, and identify opportunities for improvement.

Overall, liquidity aggregation is an important tool for forex brokers, enabling them to offer their clients better pricing and faster execution speeds, while also reducing their own exposure to risk.

How liquidity aggregation counters market manipulation?

Market manipulation refers to the practice of intentionally influencing the price of a financial instrument, typically by large traders or institutions, for their own gain. Examples of market manipulation include spoofing, where a trader places orders to create the appearance of demand or supply, and front-running, where a trader takes advantage of advance knowledge of a large order to profit from price movements.

Liquidity aggregation can help to counter market manipulation by providing brokers with access to multiple liquidity providers and a diverse range of prices. This makes it more difficult for large traders or institutions to manipulate the market, as their actions will have a smaller impact on the overall market price.

Liquidity aggregation also allows brokers to offer their clients a more transparent trading environment, with prices that reflect the actual market conditions. This can help to reduce the impact of market manipulation and prevent traders from being misled by false prices.

In addition, liquidity aggregation platforms typically include advanced risk management tools, which can help brokers to monitor for potential market manipulation and take steps to mitigate its impact. These tools may include real-time monitoring of order flow and price movements, as well as automated risk controls to prevent large orders from impacting the market.

Overall, liquidity aggregation is an important tool for countering market manipulation in the forex industry, as it allows brokers to access a diverse range of prices and offer their clients a more transparent and fair trading environment. By using liquidity aggregation, brokers can reduce their exposure to market manipulation and provide their clients with a higher level of protection.

Liquidity aggregation can help to make the forex market cleaner by increasing transparency, reducing the likelihood of price manipulation, and improving market efficiency. This can lead to a more trustworthy and reliable trading environment, which can benefit traders, brokers, and other market participants alike.

Solution providers aggregation products offerings

By using liquidity aggregator solutions, forex brokers can provide their clients with a more efficient and transparent trading environment, which can help to build trust and loyalty among their clients.

There are several reputed providers of liquidity aggregation solutions. The oldest and the most advanced products belong to oneZero and PrimeXM. Newer ones include Takeprofit Liquidity Hub and MarksMan from B2Brokers, which offer reliable basics with fewer features.

At the same time, all the solutions are quite different and the brokers should clearly recognize their needs to pick the best match. 

The cost of liquidity aggregation can be broken down into two main components: fixed costs and variable costs. Fixed costs include items such as setup fees, monthly fees, and minimum usage fees, which are typically charged regardless of the trading volume. Variable costs, on the other hand, are based on the trading volume and may include fees such as commission per million traded or mark-up on the spread.

Some liquidity aggregator providers may offer customized pricing based on the specific needs and trading volume of the broker. Others may offer tiered pricing, where the cost per million traded decreases as the trading volume increases.

In addition to the direct costs of liquidity aggregation, there may also be indirect costs, such as the cost of implementing and maintaining the necessary technology infrastructure to connect to the liquidity aggregator and ensure smooth operation.

For example, oneZero offers a range of pricing models, including a pay-as-you-go model based on trading volume, as well as customized pricing based on the broker’s specific needs and trading volume.

For the pay-as-you-go model, oneZero charges a commission per million traded, with rates varying depending on the trading volume. For example, for trading volumes up to 100 million, the commission may be 20 USD per million traded, while for trading volumes over 1 billion, the commission may be 5 USD per million traded.

In addition to the commission per million traded, oneZero also charges a minimum usage fee of 1,000 USD per month, as well as setup fees and other fees for certain additional features and services.

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Dollar firms, euro slips ahead of key inflation data

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Dollar firms, euro slips ahead of key inflation data
© Reuters – The U.S. dollar firmed in early European trade Wednesday, shrugging off signs of U.S. economic weakness ahead of the release of this week’s key inflation data as traders look for clues as to when the Federal Reserve will start cutting interest rates.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 104.080. 

U.S. inflation to prove sticky?

Data released on Tuesday showed that orders for U.S. fell a hefty 6.1% last month, while the Conference Board’s was revised lower for January and declined further in February. 

However, these signs of economic weakness have had little impact on the U.S. currency with all eyes on the , the Fed’s favorite inflation gauge, due on Thursday. 

Economists are expecting a 0.4% increase for January after 0.2% in the previous month. A stickier-than-expected reading could prompt the Fed to delay rate cuts further.

“We remain of the view that evidence of resilient inflation in the Fed’s preferred measure of inflation will offer more support to the dollar into the end of the week,” said analysts at ING, in a note.

Markets have largely priced out a rate cut at both the Fed’s March and May meeting, and the chance of a cut in June is seen as largely 50:50.

Before the PCE data, a second reading on fourth-quarter is due later on Wednesday, while there are more Fed officials due to speak, including , and .

Euro edges lower ahead of eurozone CPI

In Europe, traded 0.2% lower at 1.0818, with Europe also looking forward to its own slew of inflation reports, with Germany, France and Spain scheduled to release price data on Thursday ahead of the on Friday.

Economists are expecting an annual reading of 2.5% for February, dropping from 2.8% in January.

Still, the dollar trade continues to dominate, and this inflation release will have to provide a major surprise to influence the pair substantially.

“EUR/USD continues to follow the dollar dynamics without showing any material impact from eurozone-specific drivers. The pair looks likely to test 1.0800 in the coming days, in our view,” ING added. 

traded 0.4% lower at 1.2635, with sterling hit by a stronger dollar and after recent data showed U.K. grocery prices rising at their lowest rate since March 2022.

Kiwi dollar slumps after RBNZ meeting

In Asia, fell 1.1% to 0.6103, near a two-week low, after the held interest rates steady at 5.5%, but flagged more progress in inflation moving towards its 1% to 3% annual target. 

While the bank still signaled that it will keep interest rates higher for longer in the near-term, its comments saw traders largely price out expectations of any more rate hikes.

traded 0.2% higher to 150.80, with the yen weakening further beyond the 150 level, although steeper losses were limited by the prospect of early interest rate hikes and government intervention.

traded largely unchanged at 7.1993, as traders awaited the release of key for February, due this Friday. 



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Dollar slips vs yen after Japan inflation data, US durable goods

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Dollar slips vs yen after Japan inflation data, US durable goods
© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Caroline Valetkevitch

NEW YORK (Reuters) -The dollar eased against the Japanese yen on Tuesday after data showed Japan’s core consumer inflation exceeded forecasts while U.S. durable goods orders fell more than expected in January.

Overnight data out of Japan kept alive some expectations that the Bank of Japan might end negative interest rates by April.

In the U.S., the Commerce Department’s Census Bureau said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, tumbled 6.1% last month, exceeding the 4.5% decline forecast by economists polled by Reuters.

Markets have recently pulled back expectations on the timing and size of Federal Reserve rate cuts this year as the U.S. economy remains strong and inflation pressures stubborn.

Against the yen, the dollar dipped 0.1% to 150.56, while the , which measures the currency against a basket of peers, was last up 0.08% at 103.86.

“Inflation numbers have been drifting a bit lower in Japan over the past few months, but today’s numbers did suggest inflation is sticky even in Japan,” said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

“It probably does mean we’ll get a mild series of rate increases in Japan in the next few months.”

hit a two-year high on signs large players were buying the cryptocurrency.

Bitcoin was last up 5.22% at $57,513, while ether rose 2.26% at $3,258.

In other U.S. economic news, the consumer confidence index slipped to 106.7 this month – short of forecasts – from a downwardly revised 110.9 in January.

The U.S. core personal consumption expenditures (PCE) price index, due on Thursday, is expected to be one of the more important reports of the week for the market. Forecasts are for a rise of 0.4%.

“We’re waiting for the PCE data to give us a stronger sense of direction perhaps,” Osborne said. “I think we’re prepped for slightly stronger numbers; it probably at this point would have to be a big upside surprise to really get the dollar strengthening.”

The euro was last down 0.1% versus the greenback. It has been rising since mid-February, when it hit its lowest since Nov. 14.

Analysts said the single currency strengthened as markets scaled back bets on future European Central Bank rate cuts to 90 bps by year-end, amid encouraging signals from the economy, which supports expectations for a pick-up in growth in the second half of 2024.

German states, France and Spain will release inflation data on Thursday ahead of the euro area’s figures due on Friday.

ECB officials have sounded more cautious about a quick easing of monetary policy, with President Christine Lagarde saying wage growth remains robust, while ECB dove Yannis Stournaras ruled out a rate cut before June.

The dollar strengthened 0.06% at 7.214 versus the offshore . The People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1057 per dollar.

The weakened 0.06% versus the greenback at $0.617, with traders gearing up for what could turn out to be a significant policy meeting by the Reserve Bank of New Zealand (RBNZ) on Wednesday.

Markets are pricing in a one-in-three chance the RBNZ will raise its 5.5% official cash rate to combat stubborn inflation.

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Dollar firmer before key inflation data, kiwi sinks as RBNZ holds rates

letizo News



Dollar firmer before key inflation data, kiwi sinks as RBNZ holds rates
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Samuel Indyk and Brigid Riley

LONDON (Reuters) -The dollar firmed up on Wednesday as markets awaited a raft of global inflation data for clues on when central banks may start easing policy, while the New Zealand dollar tumbled after its central bank trimmed its forecast for a peak in rates.

The was also hanging at its lowest in over a week after inflation data came in softer than expected, reinforcing expectations that domestic interest rates are unlikely to increase further.

The data calendar looks light on Wednesday so analysts said markets were likely to focus on consumer inflation data from the U.S., Germany, France and Spain on Thursday ahead of euro area figures due on Friday.

“There’s more chance of disinflation ongoing in the euro area, which perhaps could open the door for an earlier cut from the European Central Bank,” said Danske Bank FX and rates strategist Mohamad Al-Saraf.

“We think if inflation is stickier in the U.S. than it is in the euro area then the dollar has to be strong.”

Higher-than-forecast inflation in the U.S. has prompted markets to trim bets on the number of rate cuts expected from the Federal Reserve this year, while the chance of a cut in June now stands at around 60%. At the start of the year, markets were almost fully pricing a rate cut in March.

That repricing has pushed the U.S. currency higher in 2024, including against the euro. The single currency was last down 0.3% against the dollar at $1.0815.

The , which measures the currency against six others including the euro, was last up 0.2% at 104.07, having risen 2.7% year-to-date.

With market expectations more closely aligned with the Fed’s latest projections and comments, traders would only respond if they see a trend break in tier one data, especially anything “hinting at growth weakness,” said Charu Chanana, head of currency strategy at Saxo.

New Zealand’s central bank held the cash rate steady at 5.5%, catching markets by surprise as policymakers said the risks to the inflation outlook have become more balanced.

The RBNZ also trimmed its forecast cash rate peak to 5.6% from a previous projection of 5.7%.

“With a cash rate at 5.5%, the 10 basis points of wriggle room is simply there to remind us that they’ll hike if they need to but the bias is that they probably won’t,” said Matt Simpson, senior market analyst at City Index.

The slid over 1% to its lowest since Feb. 16 at $0.6093 in response.

The Australian dollar also fell after data showed inflation at an annual pace of 3.4% in January, unchanged from December and under market forecasts of 3.6%.

Although inflation remains above the Reserve Bank of Australia’s (RBA) 2-3% target, “it is close enough to expect the RBA to hold rates steady,” said Simpson.

The Aussie was last down 0.6% at $0.6502.

Elsewhere, sterling weakened to $1.2657, down 0.2%, while the yen slipped 0.1% versus the greenback to 150.595.

“We’ve seen in the past when dollar-yen trades above 150 that authorities start to give increased attention to the currency,” Danske Bank’s Al-Saraf said.

“But I would say right now there’s probably not intervention risk unless we see a sharp move in the yen again.”

In cryptocurrencies, bitcoin was last up over 4% at $59,200, extending to its highest level since November 2021.

Ether rose 2% to $3,320.

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