Any firm that streams continuous two-way prices a broker can trade on, including banks and non-bank electronic market makers.
Liquidity providers quote prices in return for capturing spread. Non-bank electronic firms now compete directly with banks in the majors, often quoting tighter but in smaller size and with shorter-lived prices.
The quality of a broker's LP mix determines fill quality more than the advertised spread does. A tight quote that is frequently rejected under last-look is worse than a slightly wider one that fills.
Example: LP A streams 0.1 pips but rejects 8% of orders; LP B streams 0.4 pips and rejects 0.2%. On 200 round trips of one standard-lot, A's rejections and subsequent re-entries cost more than B's extra $600 of spread.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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