The currency market remains uncentralized and fragmented. While the daily daily volume in the spot, forward and swap forex market is around 3 trillion, the lack of transparency in price discovery and liquidity among numerous institutional Forex trading platforms remains a concern primordial due to the fragmented nature of the Forex market. Given the growing interest in online currency exchange operations, there are new and better trading centers available.
Due to the decentralized, segmented and over-the-counter nature of the Forex market, liquidity has always been dispersed. However, in the last ten years the number of sources from which liquidity can be obtained has increased enormously. Forex liquidity aggregators are tools that allow market participants to see all the different sources of liquidity on a single screen. The following are some of the advantages of Forex aggregators:
Forex Virtual Exchange
A Liquidity Aggregator acts as a centralized trading portal by accepting and normalizing several data sources, feeding that data to the algorithmic engines and receiving orders and sending them to the market. By presenting the liquidity in a single and consolidated order book, the aggregators act as a "Virtual Forex Exchange" for the operators that buy together. Traders can get a complete picture of the available liquidity in a single trading environment, allowing them to have maximum control over the flow of their orders by easily sorting, analyzing and making profitable decisions.
Limit transaction costs
By accessing multiple sources of liquidity, Forex aggregators recovered the market for the merchants who buy. In addition to reducing transaction costs and the time spent searching for liquidity, they also limit the potential risks involved by placing all execution orders on a ticket order. The cost of aggregation services will be compensated as operators spend less time searching for the best price.
Increase commercial efficiency
By using aggregators, merchants will no longer have to subscribe to multiple portals on their desktops. By adding functionality, prices and liquidity into a single portal, operators can save on the cost of staff and infrastructure that they would otherwise have used to manage multiple portal connections under the traditional execution system. An important challenge faced by traders who use the traditional execution process is the "last revision provision". Bank portals have a waiting period of several hundred milliseconds to several seconds before an agreement is executed. Seconds can have a great impact on profitability, especially for the algorithmic trading system. However, by adding several sources of liquidity, the provisions of the last aspect can be minimized, which increases commercial efficiency.
Best price discovery
Forex aggregators internally combine trade orders between all the purchasing side operators and the liquidity providers, which provides better price discovery and greater liquidity. This further improves the response time and order confirmations for users.
The buying companies prefer to remain anonymous while operating in the Forex market, since they do not prefer to reveal their commercial strategies. Forex aggregators allow them to execute daily currency flows without revealing their position or identity.
Smart order routing
Forex aggregators also allow for "intelligent order routing", in which purchasing companies can continuously observe all sources of liquidity to determine where the best market opportunities are. After an order is executed, the aggregator automatically decides where to route, how much of the total amount to send to which place and what orders to send. In addition, users can refer to a single screen instead of referring to several portals of one or several screens at the same time, saving on the cost of using systems for each place of negotiation. In addition to providing efficiency gains, this technology also allows market players to retain more commercial value. Therefore, Forex players are providing increasingly larger services that provide a single point of access to market liquidity, combined with a common commercial record.