Liquidity Providers - When Everything Isn’t Everything

POV: You’re a broker looking for a liquidity provider.

You’ve been to the expos, you’ve scanned the websites, you’ve talked to the salespeople. But all that exists is an echo chamber of the same selling points, usually expressed in the same way. So when LPs say the same thing, how do you know who to pick? On the surface, it’s hard to say.

The ‘everything that looks like this’ group and the ‘everything that doesn’t look like this’ group.

Our brains are pattern making machines. Imagine 20 booths at an expo all with a similar message. If one of those is yours, you’ve got a 5% share in the mind of potential clients. But if you stand out with something different, you’ll have a 50% share of the mind. Why? Because the brain separates everything off into the ‘everything that looks like this’ group and the ‘everything that doesn’t look like this’ group.

The problem is the industry is often reticent when it comes to revealing granular details. Scratch the surface, though, and nuance reveals itself, usually in form of products and pricing. One liquidity provider might be strong in one set of products but weak in another. Or pricing might take center stage.

When low pricing comes at a cost

Like a lot of things in life, low pricing can come at the detriment of product quality – but in our world, it’s usually poor service. A broker will often stick with a liquidity provider with good client support even if they can find cheaper. Why? Because the service they get justifies it.

When the taps turn off

Another trigger for consternation is supply. Shutting off a client’s liquidity without warning might make sense on paper, but it can be exasperating for the client when there’s no warning. Good communication is a hallmark for any good relationship, and it’s certainly true in our world.

It doesn’t start and end at liquidity

Forgiving the trite expression but we’re all human and adding some humanity to a service can go a long way. At Equiti Capital, we understand our clients' needs and our clients' clients' needs. They want to know they can trust us to make changes to their liquidity and notify them before they happen.

From the start, we gave client support equal priority to bespoke liquidity, because we think it’s a formidable combination. A combination we’re determined to keep.