What Are FX Liquidity Providers?

When your business executes foreign exchange (FX) transactions, the quality of your rate depends on more than just market conditions. Often it hinges on your FX liquidity provider. These entities supply the market with buy and sell quotes, allowing you to execute trades at competitive prices.

Definition and role of liquidity providers the FX market

FX liquidity providers are typically large banks, financial institutions, or firms that constantly quote bid and ask prices. Their role is to ensure that counterparties can transact in the FX market without significant delays or price gaps.

Primary vs secondary liquidity sources

Primary liquidity providers

Tier-1 banks with direct access to interbank markets.

Secondary liquidity providers

Brokers or aggregators that source rates from multiple primary providers.

For most corporates, the right choice is often an aggregator that blends multiple feeds, reducing exposure to price spikes.

Why choosing the right FX liquidity provider matters

Selecting the best FX liquidity provider isn’t just about rates, it’s about long-term cost efficiency, risk management, and operational stability. This can change a lot business-to-business.

Impact on transaction costs

Even a 5–10 basis point difference in spreads can translate into six-figure annual savings for companies with large FX exposures. Transparent pricing models help CFOs identify, and avoid hidden FX fees and markups.

Companies can use tools like an FX Benchmarker to check their rates and understand what costs are being incurred.

Risk management benefits

A reliable liquidity provider can:

• Improve hedging efficiency
• Reduce slippage in volatile markets
• Offer market insights to guide strategy

Understanding the true cost of FX by benchmarking

What is FX benchmark?

An FX benchmark is a reference rate used to measure the competitiveness of your FX deals. Examples include the WM/Refinitiv rates or central bank reference rates.

How benchmarks can reveal hidden spreads

By comparing your trade execution prices to a benchmark, you can identify if you experience consistently wide spreads, and any additional markups beyond agreed fees. This providers CFOs and Treasury leaders opportunities for renegotiation.

Recently a European airline discovered their provider was adding a 0.25% spread to EUR/USD trades, costing them £250,000 annually. Benchmarking revealed the gap, and they secured a better deal within a month.

How to compare liquidity providers

Pricing transparency

The best place to start is from asking your provider for:

• All-in rate breakdown (spread + commission)
• Historical pricing comparisons to benchmarks

Our tip: Avoid providers unwilling to show how their rates stack against independent FX benchmarks.

Technology and execution speed

Execution delays can cost money. Leading providers offer:

• Sub-second trade execution
• API integrations for automated trading
• Real-time market depth visibility

Regulatory compliance

Only work with providers regulated in reputable jurisdictions (e.g., FCA in the UK). This reduces counterparty risk and ensures better dispute resolution.

Common pitfalls avoid when selecting FX liquidity providers

1. Focusing only on headline spreads — ignoring hidden fees in settlement costs.
2. Failing to test execution quality during volatile periods.
3. Over-reliance on a single provider — limiting competitive pressure.
4. Ignoring operational fit — such as reporting, platform usability, and integration needs.

How a CFO Saved €280k in FX costs

A leader in live video technology, faced challenges in managing FX operations. Romain Pirenne lacked visibility on pricing applied by banks and brokers, making it difficult to assess and compare FX margins charged on FX Forwards and FX Options with no visibility on provider profits.

By using a Benchmarking tool, he was able to:

• Secure optimal pricing and credit terms across multiple providers
• Centralise all trade confirmations and hedge portfolio, eliminating risk of manual errors
• Gain real-time mark-to-market FX valuations for better risk management and accounting reporting

The power of benchmarking tools are undeniable, as Romain Pirenne explains, “We now have full visibility on margins applied by our FX providers and have drastically cut our costs. The transparency and efficiency it provides have been game-changing for our treasury operations.”

For CFOs seeking to unlock similar savings, the right benchmarking tools can turn hidden costs into measurable gains.

Key questions to ask your FX liquidity provider

1. How do your rates compare to FX benchmarks?
2. What’s your average execution speed during volatile markets?
3. Which regulatory body oversees your operations?
4. How do you manage conflicts of interest in pricing?
5. Can you provide independent transaction cost analysis (TCA) reports?

Choosing your liquidity provider

The choice of FX liquidity provider can be the difference between competitive pricing and significant hidden costs. By using an FX benchmarker, comparing providers on more than just spreads, and asking the right questions, CFOs can unlock substantial savings and improve execution reliability. Another way to get the best rates is to use Bracket's Liquidity Pool.

Ready to find out if you’re overpaying on FX?

Request your free FX audit today with one of our experts and get a detailed, benchmark-backed report showing exactly where you can save.

Bracket gives CFOs and finance leaders the technology to turn data into action. Our platform automates reporting, unifies fragmented financial systems, and surfaces real-time insights so you can see around corners, control costs, and deploy capital with confidence. Bracket replaces slow, manual processes with intelligent automation, empowering your team to focus on strategy, not spreadsheets.