Launching a brokerage firm has become more feasible thanks to modern technologies and centralised liquidity hubs to connect trading operators to funding pools, improving financial market efficiency.
These advancements, besides comprehensive market experience offered by prime brokerage, allow large financial institutions to reinforce their market leadership and accumulate more wealth.
This creates unfair opportunities for newly established brokers and small trade operators. This is where prime of prime liquidity provider become necessary, offering tier-2 businesses with means to operate and offer competitive brokerage services.
Let’s dive deeper into the roles of PBs and PoP brokers and which one is suitable for you.
Defining Prime of Primes
Prime of prime brokerages, or PoP liquidity providers, are entities that offer mid-size brokers a fair chance to compete against market whales and significant players who acquire a large market share.
PoPs provide brokers with technological means and liquidity sources to offer their clients the best trading conditions, such as low spread ranges and low slippage chances.
This will allow brokerage startups and newly established businesses to benefit from consolidated order books, deep market liquidity, and fast order execution.
Ultimately, prime of prime services decrease the gap between market participants, especially prime brokers that offer a wide range of services that appeal to leading financial firms.
Prime Brokerage Range of Services
Large financial institutions, investment banks and institutional investors entail a large number of activities, such as account management, cash allocation, invoice settlement, market research, financial consultancy and many more tasks.
Market whales and leading Forex brokerage brands tend to outsource these responsibilities to professional entities, such as prime brokers, which allows them to focus on main business activities.
PBs collaborate with banks and financial corporations to enhance their money management and risk analysis, which further improves their financial position.
As opposed to PoPs, which offer affordable access to liquidity, PBs may charge prime service fees that mid-size brokers and startups cannot afford, making them a key pillar for considerable financial market participants.
Final Thoughts
Prime brokerage firms offer a helping hand to large financial institutions, which increases market imperfections. Therefore, Prime of prime providers are accustomed to mid-size businesses and newly launched brokerage firms wishing to gain market access and liquidity at affordable prices.
