Overcrowded aggregators harm everyone, DB research finds

Deutsche research finds increasing the number of liquidity providers in an aggregated environment can harm execution quality

Overcrowding effects
"The presence of just one externaliser in the aggregated liquidity pool can force other participating LPs to adopt the same behaviour"

Increasing the number of liquidity providers in an aggregated pricing environment can harm the overall quality of client execution, according to a hypothetical research paper published by Deutsche Bank. It finds that competing liquidity providers (LPs) are pushed to quote such competitive spreads that becoming the top-of-the book price becomes a disadvantage.

With the emergence of non-bank liquidity providers (NBLPs), clients who tended to have relationships only with banks have started

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