Liquidity Pools - LP Inclusions/Exclusions for Pricing Instruments
Sometimes there is a need to direct specific instruments or flow to a chosen LP or to price solely from a core LP:
- Routing toxic flow and/or hedge flow to dedicated LP feeds
- Brokering/STP of CFD flow - where LPs pricing use an entirely different basis it is important to show and route CFD flow to a primary LP to avoid slippage
Liquidity Pools have the functionality to be able include or exclude LPs from price creation or order routing.
Specifying LPs for Pricing Instruments from a Pool
Using inclusions
Instruments defined on a pool will be priced from the best (uncrossed and up-to-date) TOB price from the pool of LPs defined in the constituent markets regardless of available quantity.
To price an instrument from a sole LP for a pool add an override in Include and select the LP name and instrument to be priced, ensure the instrument does not exist in the global instrument override and is priced by the chosen LP. The LP used in the inclusion override does not have to be specified in the constituent markets.
In the below setup, FX-Majors are priced by the 4 constituent markets (FINALTO, FINALTO2, INVAST, INVAST2), whereas XAUUSD is priced by CITADEL only.
Inclusions can also be used to add another constituent to include in the pricing of a specified instrument but not others.
In the below example all FX instruments (including XAUUSD and XAGUSD) are priced from the 7 markets in the constituents, XAUUSD and XAGUSD are priced from the 7 constituents plus INVAST:
Using exclusions
Alternatively, we can exclude an LP from being used in pricing an instrument. If INVAST is instead added to the exclusion list of a pool where it is a constituent:
The pool will price all FX list instruments from INVAST, JPM_RETAIL and JUMP, whilst XAGUSD and XAUUSD would be priced from just JPM_RETAIL and JUMP:
Publishing the pool constructed pricing
We are able to specify on the Channel level to publish the internalisation model or the broker pool out to clients:
See more about how prices are distributed through Compass here and how pools can be used to broker to specific LPs
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