Liquidity provider

A firm that quotes both a bid and an offer continuously in an instrument and stands ready to deal on them. In foreign exchange the population is a mix of major banks, which quote as part of a wider client franchise, and non bank electronic firms, which quote as their whole business. On an exchange the equivalent role is formalised: a designated market maker signs up to quoting obligations, minimum sizes and maximum spreads written into the venue's rules. Off exchange there is no such obligation, and a stream can be widened or withdrawn at will.

What reaches a client is an aggregate rather than a stream. A broker connects to several providers, receives each one's prices, and assembles a composite book from them, so the quote displayed is the best bid and the best offer across the set, with the broker's own mark up applied where the account model includes one. Credit is intermediated, commonly through a prime broker, which is why the identity of the firm on the other side of a fill is not visible on a ticket. Each provider applies its own acceptance rules to a request, and last look is the best known of them.

The trip is reading the term as a credential. It describes a function, and it covers a global bank and a small proprietary firm equally accurately, so a count of providers says nothing on its own about the prices an account meets. The figures that do describe it are the size quoted at the top of the book, how consistently that quote survives an economic release, and the proportion of requests filled. Practitioners disagree about whether naming providers is meaningful disclosure, since the mix changes continuously and the composition on any given day is not the composition a client dealt against last month.