Liquidity Pool
Also called: LP, liquidity provider
A venue or aggregator that gathers buy/sell interest from multiple participants, providing tighter spreads and deeper books.
Definition
In FX, liquidity is fragmented across banks, ECNs, and prime brokers. Liquidity pools (or LPs) aggregate these sources so retail brokers can offer one combined price.
The depth and quality of a broker’s liquidity pool directly affects the spreads, slippage, and slip-protection you experience as a trader.
Example
An ECN broker connects to 12 bank/non-bank LPs. When you buy EUR/USD, the broker auto-routes to whichever LP shows the best ask in that microsecond.