Liquidity Provider (LP)

A Liquidity provider is an individual or an institution that creates a market for a financial instrument by offering to both buy and sell it.

Liquidity providers make their profit in the bid-ask spread, offering price stability and making trading a smooth affair. They are the “middle-man”, the bridge between market participants. When it comes to the Forex market, the term associated with liquidity is Tier 1.

That refers to big-name investment banks that provide the market for all currency exchange pairings.