How to choose a liquidity provider: 10 questions to ask before you compare commission rates

Key takeaways

• Compare all-in cost at your own volume: commission, spread at your size, fixed fees and platform ties.
• Verify the contracting entity on its regulator’s register before you look at price.
• Ask how the provider behaved on a named event day, in numbers, and whether it cut anyone’s limits while the session was still running.

Compare the whole price

To choose a liquidity provider, compare what it costs you all-in at your own volume, what it does with your orders when markets move, and who holds your money. The commission per million is only one line of that.

It’s also the line most brokers check first. It comes in writing, it compares cleanly, and it has been falling. A handful of providers now headline rates of a few dollars per million. But a headline rate tells you nothing about spread at your size, rejected orders, platform lock-in, monthly minimums or how long your withdrawals take. Any of those can cost more than the commission saves.

So here are the ten questions we’d ask any liquidity provider before reading its rate card. Ask them of us too. If FX-EDGE is a new name to you, run the list on us first. They’re in three groups: who you’re contracting with, what happens on a volatile day, and what it really costs to run. Each one says what to ask for and what a red flag looks like.

Who you’re contracting with

Before price, check who signs your agreement and what happens to your money. These three answers take an afternoon to verify.

1. Which entity signs your agreement, and can you find it on the regulator’s register?

A provider’s brand and its contracting entity are often different things. Groups run several entities in several jurisdictions, and the one on your agreement may not be the one on the homepage. Your rights depend on the licence of the entity that signs.

• Ask for: the legal name of the entity that signs your agreement, its licence number and the regulator behind it. Then look it up yourself on the regulator’s public register.
• Red flag: “regulated in several jurisdictions” with no entity named, or a licence that covers a different entity from the one on your contract.

2. How is your margin held, and how fast does it come back?

The margin you post is your working capital. If you hedge, the profit on those hedges sits there too, and that’s the money that funds client withdrawals. Two things decide whether it’s safe and usable: who legally owns it while it’s posted, and how quickly you can pull realised profit and excess margin.

If the agreement transfers ownership of your margin to the provider, you become an unsecured creditor if the provider fails. Some agreements also let the provider re-use your collateral, which puts it in someone else’s funding chain.

• Ask for: the clauses on title transfer, security interest and re-use (rehypothecation), the usual turnaround for returning realised profit and excess margin, and the daily wire cut-off, in writing.
• Red flag: a verbal “your funds are safe” that the agreement doesn’t back up, or “it depends” with no number.

3. Who stands behind the quote?

A price stream is only as reliable as the liquidity underneath it. Ask how many independent pricing sources feed the provider, and which institutions it hedges with. A long list of price feeds can still rest on one or two prime-broker relationships, and those are what fail together.

• Ask for: the number of pricing sources, the names of the provider’s own liquidity counterparties where it can disclose them, and what happens to your pricing if one drops out.
• Red flag: “tier-1 liquidity” with no names or numbers.

Our answers: FX-EDGE works through three licensed entities: FX-EDGE SC LTD (Seychelles Financial Services Authority, licence SD099), FX-EDGE V LTD (Vanuatu Financial Services Commission, licence 700604) and DNKR ZA (Pty) Ltd (South Africa FSCA, licence 49288). Your agreement names the one you contract with. All three are offshore. If your own regulator requires an EU- or UK-licensed counterparty, we’re the wrong provider for that flow. Ask us for the collateral clauses and our withdrawal turnaround before you sign.

What happens on a volatile day

A rate card describes a calm market. Your clients trade hardest when markets aren’t calm: rate decisions, payrolls, a gold gap on Monday open. These three questions test whether the terms you agreed survive those sessions.

4. Does the provider use last look, and are its rejection rules written down?

Under last look, the provider holds your order for a moment and can reject it if the price moves against it in that window. On paper the spread stays tight. In practice, the rejections cluster on the orders that were about to fill in your favour, and your clients see rejections or requotes at the worst moments.

Your pricing can also change if the provider decides your flow profile has changed. That’s normal, but you should know the rules in advance. The FX Global Code, the industry’s voluntary code of conduct, expects providers to disclose how they handle rejections and last look.

• Ask for: a written answer on whether last look applies, to which instruments and with what maximum hold time; the stated basis for rejecting or repricing orders; and whether the provider has signed the FX Global Code.
• Red flag: “minimal last look”, “only in fast markets”, or conditions that change with no written reason and no notice.

5. Can the provider show execution on a named event day?

Averages over a month hide the sessions that matter. Ask for data from a specific, dated event, not a “from” spread. A “from” spread describes the best moment of the month, not the one you’ll trade in.

• Ask for: fill ratio, rejection rate, average spread at your trade size, and whether slippage is passed on in both directions, for a named day such as the last US payrolls release.
• Red flag: only negative slippage passed on, or no event data at all. If none exists, ask for a live test feed to measure on the next event.

6. What NOP limit do you offer, and does it hold during an event?

Net open position (NOP) is the largest net exposure a provider lets you carry, per instrument or across your account. It’s the ceiling on how much client risk you can hedge. Hit it and any hedge that would increase your net position gets rejected, or you have to post more margin, at the moment your book is moving fastest.

A NOP figure means little on its own. It’s usually tied to the collateral you post, and it can differ by instrument and by session. Some providers also cut limits or raise margin while a volatile session is still running, which forces you to cut your own clients’ positions at the worst price. If your book is gold-heavy, check gold first. A gold lot carries a large notional that grows with the price, and client flow in gold tends to run one way during a move, so your net gold exposure can reach the limit long before your FX does.

• Ask for: default NOP by instrument (gold, FX majors, indices) and by session (weekdays, weekends and 24/7 instruments, event windows); how NOP scales with the collateral you post; what happens when you hit it; the margin schedule; and the notice period for any cut.
• Red flag: a large headline NOP quoted for FX majors only, or limits “reviewed in line with market conditions” with no notice period in the agreement.

Our answers: FX-EDGE executes with no last look. Leverage is up to 1:200, set per client, and 5:1 on our 24/7 CFDs on indices, energy and metals. We don’t publish event-day execution figures. Ask us for a live test feed and measure us on the next payrolls release, and ask for your NOP limits by instrument and session before you sign.

What it really costs to run

Now the price, but the whole price. Commission is one line. Platform ties, fixed fees, time to launch and spread at your size are the others, and for a growing broker they often add up to more.

7. Are you tied to a platform or bridge bundle, and what does leaving cost?

Some of the lowest rates only apply if you also buy the provider’s trading platform, bridge or other services. Drop one and the discount can disappear, or a setup fee can be clawed back. If you outgrow the platform, the rate goes with it.

• Ask for: which platforms and bridges connect, whether the rate depends on buying anything else, the exit terms in writing, and what happens to open positions and bridge settings in the week you move your flow.
• Red flag: pricing that holds “only while all services are contracted”.

8. What do you pay before you trade a lot?

Monthly minimums, setup fees, market-data fees and bridge licences are fixed costs. Below about $300m a month in traded volume, which is 150 round turns of $1m, a $1,000 monthly fee costs you more than commission does at $6 per round turn.

• Ask for: every fixed fee, monthly minimum and one-off charge, in one list.
• Red flag: fees that show up in the agreement but not in the proposal.

9. How long until you’re live, and who answers when something breaks?

For a new brokerage, every week of onboarding is a week without revenue. And when a bridge drops at 3 a.m. your time, the value of the relationship is how fast someone picks up.

• Ask for: a realistic onboarding timeline from signed agreement to first trade, the support hours, and a named contact.
• Red flag: “typically a few weeks” with no breakdown, or support only through a ticket queue.

10. What is the all-in cost per million at your volume?

This is the commission question, asked properly. Check first whether the rate is quoted per side or per round turn, because providers use both and the two don’t compare. Then add the other lines.

• Ask for: a worked example at your own monthly volume and instrument mix, covering commission, average spread at your size, fixed fees and any platform costs.
• Red flag: a provider that will only quote the headline rate.

Here’s how the cheaper-looking rate can lose. Two hypothetical providers and a broker trading $500m a month of EUR/USD, counting both legs, which is 250 round turns of $1m:

Cost line (per month)	Provider A	Provider B
Headline commission	$4 per $1m, per side	$6 per $1m, round turn
Commission on $500m traded	$2,000	$1,500
Extra spread at your size (A averages 0.1 pip wider)	$2,500	$0
Monthly fee	$1,000	$1,000
All-in	$5,500 ($11 per $1m)	$2,500 ($5 per $1m)

Provider A has the lower headline and costs more than twice as much. The spread assumption does most of that work: 0.1 pip on EUR/USD is about $10 per $1m round turn, so 250 round turns cost $2,500. Take that line out and A still costs more, $3,000 against $2,500, but the gap narrows to the point where the other nine questions decide it. The example also leaves out rejected orders and the cost of leaving a bundle.

Our answers: FX-EDGE costs $1,000 a month to start, with no monthly minimums. The MT4/MT5 bridge is included at no additional cost for A-Book and B-Book. You can connect through Match-Trader, MT4, MT5, cTrader or FIX API, with no platform bundle to buy. Ask us for the worked example above at your own volume and instrument mix.

The checklist

Take this into your next call with a liquidity provider. Every answer should come with a document or a number.

A new brokerage with a small, steady book can reasonably weight questions 7 to 10 most. As your book grows and starts to carry risk through events, questions 1 to 6 decide more of the outcome. Either way, compare the headline commission last.

We’d rather you asked us all ten. Talk to the FX-EDGE team and we’ll answer in writing, with a worked cost example at your volume.

FAQ

How do I choose a liquidity provider for a new brokerage?

Compare all-in cost at your expected volume. Check the contracting entity on its regulator’s register, how your deposit is held, whether the provider uses last look, and whether its rate depends on buying a platform bundle. Then compare onboarding time and fixed monthly fees.

Is commission per million per side or per round turn?

It depends on the provider, and it doubles the cost if you get it wrong. A rate quoted per side is charged on both the opening and the closing trade, so $4 per side costs $8 per completed round turn. Always ask which basis a quote uses.

What is last look in FX?

Last look is a short window in which a liquidity provider can accept or reject your order after seeing it. It lets the provider reject trades when the price moves against it, which shows up as rejections and requotes for your clients during volatile sessions.

What fees does a liquidity provider charge besides commission?

Common ones are monthly minimums, setup fees, bridge or platform licences, and market-data fees. Spread at your trade size and rejected orders are costs too, even though they don’t appear on an invoice.

What is a prime of prime liquidity provider?

A prime of prime (PoP) gives brokers access to institutional liquidity that would otherwise require a direct relationship with a tier-1 bank. It aggregates pricing, extends credit and connects to retail trading platforms, with lower minimums and faster onboarding than a bank prime broker.

What is NOP in forex liquidity?

NOP, or net open position, is the largest net exposure a liquidity provider lets a broker carry, per instrument or across the account. It caps how much client risk the broker can hedge with that provider. NOP limits are usually tied to the collateral posted and can vary by instrument and trading session.