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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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Yen likely set for more pain against dollar as wage data to keep BoJ policy loose

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The yen will likely continue to drag its heels against the dollar, MUFG says, as the latest economic Japanese data showing weaker wage growth is expected to keep the Bank of Japan leaning dovish at the policy meeting next week.

USD/JPY was up 0.1% to 139.66.

Without a shift in BoJ policy to a less dovish stance, the yen is “more likely to continue trading at weak levels,” MUFG said following weaker-than-expected wage data overnight Tuesday.

Real wages in Japan dropped 3.0% from a year earlier in April, the labor ministry reported Tuesday, steeper than the 2.0% economists had expected and will “reinforce market expectations for the BoJ to maintain current loose policy settings at this month’s policy meeting on 16th June and for the rest of this year,” MUFG added.

The weakness in April was driven by a “drop in overtime earnings, which fell for the first time in more than two years, and subdued bonus payments growth,” Daiwa Capital Markets said in a note.

The yen’s breach of 140 against the greenback on Monday stoked talk that the central bank could intervene to prop up the currency following a similar move last year when the yen topped 150 against the dollar.

But the latest data is a setback for the BoJ, MUFG says, as the central bank was expecting that the recent round of agreements by labor unions and employers to hike wages would have been reflected in the data.

“The BoJ has been expecting around 40% of the wage negotiation results to have been reflected in April with the number rising to more than 80% by July,” according to MUFG.

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Dollar adrift as traders assess Fed options; Aussie buoyant

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The dollar edged lower on Wednesday as traders assessed the odds of a rate hike by the Federal Reserve next week, while the Aussie scaled a fresh three-week high in the wake of a rate increase and a decidedly hawkish stance by its central bank .

The Australian dollar peaked at $0.6690 in early Asia trade, its highest since mid-May, buoyed by lingering effects of the Reserve Bank of Australia’s (RBA) quarter-point interest rate increase to an 11-year high on Tuesday.

The decision and the RBA’s hawkish policy statement had sent the Aussie rising 0.8% in the previous session, with governor Philip Lowe warning of more tightening on the cards because inflation was still too high.

“The cash rate is now 4.1%, which we think is in a deeply restrictive territory, so that obviously means that the risk of a hard landing in the Australian economy has increased,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).

In a speech on Wednesday, Lowe reiterated that some further tightening may still be required to bring inflation to heel, though that would depend on how the economy and inflation evolve.

In the broader currency market, the U.S. dollar dipped in early Asia trade, as traders pared back their expectations of a rate hike at next week’s FOMC meeting.

Against the greenback, sterling rose 0.08% to $1.2432, while the kiwi gained 0.08% to $0.6084.

Money markets are pricing in a roughly 19% chance that the U.S. central bank will raise rates by 25 basis points next week, compared to an over 60% chance a week ago, according to the CME FedWatch tool.

Data out last week showed that the U.S. services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, a welcome sign for the Fed in its fight against inflation.

“We don’t think the FOMC will hike next week … but risks again are skewed to the upside,” said Kong.

The U.S. dollar index slipped 0.03% to 104.05, while the euro rose 0.07% to $1.0698.

Euro zone consumers lowered their inflation expectations, a European Central Bank survey showed, a relief for policymakers after an unexpected surge a month earlier.

Against the Japanese yen, the greenback slipped 0.27% to 139.26.

Elsewhere, the Turkish lira slid nearly 2% to a fresh record low of 21.99 per U.S. dollar, while the Canadian dollar rose to a fresh one-month high of C$1.3388 to the greenback ahead of an interest rate decision later on Wednesday.


In the cryptoverse, bitcoin, the world’s biggest cryptocurrency, was last marginally higher at $27,273, after jumping nearly 6% on Tuesday.

The U.S. Securities and Exchange Commission (SEC) on Tuesday sued Coinbase (NASDAQ:COIN), accusing the largest U.S. cryptocurrency platform of operating illegally because it failed to register as an exchange, a move which came just a day after the regulators sued Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao.

“Bitcoin is trading higher … on a flight to the quality end of crypto,” said Tony Sycamore, a market analyst at IG Markets.

Binance’s BNB token was up 0.45% at $283.13, having plunged 9.2% on Monday.

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Asia FX muted as Chinese, Australian economic data disappoints

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Most Asian currencies were muted on Wednesday as weaker-than-expected economic prints from China and Australia soured sentiment towards the region, while anticipation of an upcoming Federal Reserve meeting also weighed.

The Chinese yuan reversed early gains and traded flat after data showed the country’s trade surplus sank to a 13-month low in May, driven chiefly by a surprise tumble in exports. The reading showed that overseas demand for Chinese goods remained weak amid worsening economic conditions across the globe, presenting new headwinds for China as it struggles to recover from three years of COVID disruptions.

The Australian dollar was flat as the country’s economy barely grew in the first quarter, amid pressure from high interest rates and inflation.

But the Aussie took some support from comments by Reserve Bank Governor Philip Lowe, who reiterated that local interest rates may need to rise further in order to curb overheated inflation. The RBA had hiked interest rates again on Tuesday, bringing them above 4% for the first time in 12 years.

Most other Asian currencies moved little, given that the prospect of a weak Chinese economy bodes poorly for countries with high exposure to the Asian giant.

The Japanese yen was a clear outperformer for the day, rising 0.3% from near six-month lows as recent losses in the currency spurred speculation that the government could once again intervene in currency markets to support the yen.

A dovish outlook from the Bank of Japan greatly reduced the yen’s appeal in a high-yield environment, which had in turn spurred steady intervention through late-2022.

Weak inflation and wage growth readings for recent months spurred more bets that the BOJ will maintain its ultra-loose policy in the near-term.

The Indian rupee moved little ahead of a Reserve Bank meeting this week.

The dollar was flat in Asian trade after a muted overnight session, with the dollar index and dollar index futures moving less than 0.1% in either direction. While weak U.S. economic data spurred some losses in the dollar this week, it remained steady near 11-week highs as markets grew uncertain over a Federal Reserve meeting next week.

Fed Fund futures prices show markets are positioning for a nearly 82% chance the central bank will keep rates steady. But given that recent inflation and labor market data beat expectations, traders remained wary of a potential 25 basis point hike by the Fed.

Still, even if the Fed decides to pause its rate hike cycle, markets see little chances of a rate cut this year, with high interest rates set to weigh on most Asian currencies.

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