Where Does the Forex Broker’s Price Come From?

When you trade forex, your broker is your only price source—but where do they get these prices from? 🤔

📌 Key Takeaway: Unlike stocks, which trade on centralized exchanges, forex is an over-the-counter (OTC) market with no single price source.

Your broker’s price comes from:
✔ Liquidity Providers (LPs) – Banks, hedge funds, and electronic market makers.
✔ Prime Brokers (PBs) or Prime of Prime (PoPs) – Aggregators of liquidity.
✔ Internal order flow – Some brokers set their own prices.

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Since there is no “official” forex price, brokers may manipulate prices to their advantage. 🚨

📌 How Forex Brokers Generate Prices

📌 The price YOU see is influenced by:
✔ How your broker sources its prices.
✔ Whether the broker adds markups to the spread.
✔ How efficiently the broker executes your orders.

There are two key prices for every forex trade:
🔹 Bid Price – Price at which you can sell.
🔹 Ask Price – Price at which you can buy.

The difference between bid and ask is the spread, which is how brokers profit.

🔹 Example:
📍 EUR/USD Bid: 1.1000 | Ask: 1.1002
📍 Spread = 2 pips (0.0002)

💡 But where do these bid/ask prices actually come from?

📌 How Reputable Brokers Source Their Prices

Reputable brokers get their prices from:

1️⃣ Liquidity Providers (LPs) – Banks, hedge funds, and market makers.
2️⃣ Prime of Prime (PoP) – Aggregators that give smaller brokers access to LPs.
3️⃣ Internal Order Flow – Some brokers generate prices based on customer trades.

1️⃣ Liquidity Providers (LPs)

A liquidity provider (LP) is a financial institution (bank or non-bank market maker) that creates buy and sell prices for currency pairs.

Top Tier-1 Liquidity Providers:
✔ JPMorgan
✔ Citi
✔ UBS
✔ Deutsche Bank
✔ HSBC
✔ Barclays
✔ XTX Markets (non-bank LP)

🔹 How It Works:
✔ LPs stream bid/ask prices to brokers.
✔ Brokers aggregate quotes from multiple LPs to get the best price.
✔ The broker’s price engine selects the best available bid/ask price.

🧐 Ask Your Broker:
✔ Who are your liquidity providers?
✔ Do you get prices directly from Tier-1 banks, or through a Prime of Prime (PoP)?
✔ Can you provide a list of LPs you use?

🚨 Red Flag: If a broker refuses to disclose where its prices come from, be cautious.

2️⃣ Prime of Prime (PoP) Liquidity

Since most brokers are too small to deal directly with banks, they use a Prime of Prime (PoP) provider.

🔹 How It Works:
✔ PoPs aggregate prices from multiple LPs.
✔ Smaller brokers connect to PoPs instead of direct LPs.

🔹 Examples of Prime of Prime Providers:
✔ LMAX Exchange
✔ IS Prime
✔ CFH Clearing
✔ Saxo Bank

🧐 Ask Your Broker:
✔ Do you use a Prime of Prime provider?
✔ How often do you review LP pricing?
✔ Can you provide proof of LP pricing data?

🚨 Red Flag: If a broker claims it has direct access to Tier-1 LPs but is small or unregulated, this is misleading.

3️⃣ Internal Order Flow (Broker-Generated Prices)

Some brokers create their own prices instead of sourcing them externally.

🔹 How It Works:
✔ Brokers adjust prices based on customer trades instead of LP pricing.
✔ This is common with B-Book brokers who profit when traders lose.
✔ Some brokers manipulate prices (stop-hunting, widening spreads, asymmetric slippage).

💡 How to Detect Broker Price Manipulation:
✔ Compare prices across multiple brokers.
✔ Use an independent price feed (e.g., TradingView, LMAX, FXCM).
✔ Watch for excessive slippage, requotes, and spread spikes.

🚨 Red Flag: If your broker’s price is far off from other brokers, it may be manipulating quotes.

📌 Why There’s No Single “Market Price” in Forex

Unlike stocks, which trade on exchanges, forex is an OTC market with no centralized pricing system.

📌 Key Differences:

🧐 What This Means for Traders:
✔ There is no single “true” price for forex.
✔ Prices vary by broker, depending on LP relationships.
✔ Some brokers manipulate prices to their advantage.

📌 Beware of Forex Price Manipulation 🚨

Because there is no single market price, shady brokers can manipulate prices in their favor.

🚨 Common Broker Manipulation Tactics:

❌ Stop-Hunting – Brokers artificially move price to hit your stop-loss.
❌ Asymmetric Slippage – Negative slippage is applied, but positive slippage is ignored.
❌ Widening Spreads – Increasing spread to trigger margin calls or stop-outs.
❌ Requotes – Rejecting your orders and forcing you to accept a worse price.

🧐 How to Detect Manipulation:
✔ Compare prices across multiple brokers.
✔ Use independent price feeds (e.g., LMAX, FXCM, TradingView).
✔ Avoid brokers with high slippage and requotes.

🚨 Red Flag: If your stop-loss is hit but no other brokers show that price, your broker is likely manipulating quotes.

📌 How to Ensure You Get Fair Pricing

💡 Follow These Steps to Protect Yourself:

✔ Compare Prices Across Brokers – Don’t trust just one platform.
✔ Use Independent Price Feeds – TradingView, LMAX Exchange, FXCM.
✔ Choose a Broker with Direct LP Access – Look for Tier-1 LPs or PoP relationships.
✔ Check Regulation – Regulated brokers must follow fair pricing rules.
✔ Ask for the Broker’s Price Methodology – Legit brokers provide transparency.

🧐 Ask Your Broker:
✔ Where do your bid/ask prices come from?
✔ Who are your liquidity providers?
✔ Do you use a Prime of Prime (PoP) provider?
✔ Can you provide proof of independent LP pricing?

🚨 Red Flag: If a broker refuses to disclose pricing sources, look elsewhere.

📌 Final Thoughts: Where Forex Broker Prices Come From

✔ Forex has no single “market price” – Every broker gets different prices.
✔ Reputable brokers source prices from Tier-1 LPs or Prime of Prime (PoP).
✔ Some brokers manipulate prices (stop-hunting, slippage, requotes).
✔ Compare prices across multiple sources to detect manipulation.
✔ Always ask brokers for their pricing methodology & liquidity providers.

🚀 If your broker isn’t transparent about pricing, switch brokers!