Liquidity Bridge Hosting: How to Bridge the Gap for Reliable Forex Trading
In finance, liquidity denotes how active a market is and due to the high volume of trading occurring around-the-clock, the Forex market is in fact one of the most liquid markets in the world. Liquidity in the Forex market measures the speed at which a trade can be executed without impacting the market price, and thus the relative value of pairs, for example EUR/USD.
Since liquidity is a key consideration for investors when determining trading decisions, Forex Brokers have come to rely on Liquidity Bridges to act as an intermediary between trading platforms like MT4, MT5 or cTrader and liquidity providers. With that being said, let's take a closer look at the importance of a liquidity bridge, and what factors need to be considered when choosing a data center for liquidity bridge hosting.
What is a Liquidity Bridge and why is it important?
A Liquidity Bridge, or simply 'bridge', is a piece of software that has become an essential component for any brokerage. The bridge effectively stands as a linkage between the trading platform and product price by connecting the broker to a prime of prime (PoP) or prime broker.
As well as providing direct market access, a liquidity bridge also offers faster trade execution, enhances security and minimizes slippage. Having become the industry standard for both retail and institutional Forex Brokers, a liquidity bridge is also considered as an additional method of risk mitigation for brokerages.
By utilizing a liquidity bridge, forex brokers are assured that each trade is pushed and cleared correctly before reporting back to the trading platform. In addition to that, it also provides other tools that are beneficial to a broker's risk management, such as the ability to route orders, extensive reporting capabilities and adjustable exposure.
Another major feature that liquidity bridges offer is the ability to set pricing markups, expanding the possibilities that a broker has when making a product offering, for instance offering different spreads to different client-bases. Bridges also offer the ability to aggregate prices from multiple liquidity sources into one single feed, ultimately allowing brokers to buy and sell assets as close to the market price as possible, resulting in a better trading experience for the end user.
Choosing the right Data Center for Liquidity Bridge Hosting
As the foundation of your trading infrastructure, choosing the right data center for liquidity bridge hosting is fundamental. When deciding, it's important to take the following factors into consideration.
Location
In order for a liquidity bridge to run seamlessly, a high quality, stable connection is required. The performance of your liquidity bridge determines the overall experience for the end-user, so opting for a data center in a strategic financial location, like London (UK), would be the optimal hosting environment to achieve the ultra-low latency that is required.
Security
Security is paramount so it's important to ensure that your chosen data center is located in a country and area that is not at risk of natural disasters, as well as protected from any high-risk man-made disasters, and features the highest level of redundancy. It's also important to check that your data center is legally secure, certified and in line with all of the necessary compliance requirements.
Support
Do not underestimate the importance of customer support when it's time to choose your data center. Having a 24/7 responsive support team available will not only help with the initial integration of your liquidity bridge, but also with any other potential issues that could arise.
Written by Stefano Sordini, CEO at NetShop ISP, exclusively for Fazzaco.com
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