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Back to Basics: FX Bridging Technology

After winning this year’s Global Forex Award for ‘Best Bridge Provider’, we thought it would be helpful to take it back to basics for any retail brokers in the market for such technology.
To reduce market risk, many retail brokerages choose a Straight Through Processing (STP) model. A liquidity bridge is required to run this model to connect the brokers MT4/MT5 server application directly to the Liquidity Providers.

 

What is FX bridging technology?

FX bridging has been around for over 12 years. It is a low-latency technology that acts as an intermediary between a trading platform and a source of pricing/liquidity. It gives retail brokers complete control to set up a direct connection from a trading platform, such as MetaTrader 4 (MT4) or MetaTrader 5 (MT5) to Liquidity Providers.

 

What is bridging software’s purpose for brokers?

The primary purpose of a liquidity bridge is to deliver excellent pricing from the best liquidity providers by:

  • Reducing risk

With bridging technology, a broker can automatically cover all broker risks with LPs in real-time, efficiently managing A-Book and B-Book flow with ‘Cover Trades’ and creating various spread profiles with custom mark-up functionality.

  • Increasing profit

Liquidity bridges can monitor trading conditions and reduce slippage to maximise a retail broker’s top line.

What questions to consider when choosing an FX liquidity bridge?

1. Is the vendor a credible connectivity provider?

In a highly competitive market, the credibility of vendors should be top of your list of considerations. It would be beneficial to determine how long the bridge provider has been in business, as new technologies are susceptible to hiccups. Therefore, an experienced technology vendor is more likely to tackle unforeseen obstacles and optimise its offering based on real customer situations and feedback. Additionally, it’s helpful to consider any awards won for their technology, especially those independently nominated.

 

2. Can the platform maintain stability?

The scalability and reliability are critical to platform stability and transaction execution to process customer orders more efficiently, and therefore should be considered when choosing a technology vendor. A liquidity bridge should take only a few milliseconds to process a client order, providing a fast and efficient automated STP for the financial entity.
It would be valuable to know who some of the largest bridging vendors clients are, as for such clients, implementation can be time and resource-intensive. Consequently, the vendor will need to have suitable systems to handle the complexities and expertise to manoeuvre the challenges inherent in such deployments.

 

3. Can they help you differentiate yourself from your competitors?

Top-tier vendors can provide many additional features and services that will help you attract and retain more clients, such as:

  • Aggregated price feeds
  • The ability to support partial fills and multiple fills
  • Multiple spreading options

Additional services could include:

Having access to various solutions will allow you to create a better and more diverse offering for your clients.

 

4. What does your support package include?

Access to reliable liquidity bridging software is critical for retail brokers, and with trading happening around the clock, the support provided by your vendor should reflect this. You may be based in the UK or have clients who actively trade well from Asia, and in either case, it is necessary to have a solid 24-hour support team on hand while the primary markets are open. Therefore, evaluating the tech vendor’s team to ensure sufficient experience and strong market knowledge is essential.
Do not underestimate the importance of your chosen vendor having a robust disaster recovery plan, as then, even in the worst-case scenario, downtime will be limited.

 

More about Gold-i’s MT4 Bridge & MT5 Gateway

The award-winning Gold-i Liquidity Bridge for MT4 and MT5 gives you complete control to set up direct connections from your MT4 or MT5 server to one of over 70 Liquidity Providers (LPs) in multiple asset classes. Get in touch if you would like to arrange a demo or trial.

About the author

Gold-i

Gold-i

Gold-i is a global market leader in trading technology, helping hundreds of multi-asset brokers to transform their trading operations with robust liquidity management solutions, award-winning MetaTrader Plug-ins, business intelligence tools and all with the best support in the industry. Gold-i has won over 20 trade awards in recognition of its innovative products, commercial success and future potential, including a prestigious Queen’s Award for Enterprise 2014. Has been recognised as one of the most influential Fintechs in 2018 and 2019.