How liquidity is measured
No single number captures liquidity. Traders and venues look at several:
- Bid-ask spread: the gap between the best buy and sell prices
- Depth: the quantity available within a set distance of the mid price
- Slippage: how far an order of a given size moves the fill price
- Traded volume: how much changes hands in a day
- Resilience: how fast the book refills after a large trade
Where an exchange's liquidity comes from
Liquidity is supplied by resting limit orders. Most come from professional market makers that quote both sides continuously and earn the spread, and exchanges attract them with low maker fees, fast APIs and sometimes formal market-making agreements.
A new venue has an empty book. The usual answers are to connect to liquidity providers or larger exchanges and mirror their prices, to route orders out, or to start with a quote-based model instead of an order book.
Why liquidity matters
A customer who gets a worse price than expected does not come back, so liquidity is much of what an exchange sells. Thin markets are also easier to manipulate.
In the EU, Article 76 of MiCA requires a trading platform's operating rules to set the conditions for a crypto-asset to remain accessible for trading, including liquidity thresholds.
The word has a second meaning in finance: a firm's ability to meet its payments as they fall due. That is a matter of treasury, not of markets.
Where Liquidity shows up in a platform
Modules that do the work
- Matching engineA low-latency order book for spot markets, with market makers and outside liquidity.
- Market dataLive and historical prices for crypto, stocks and FX, from the data vendors you choose.
- FXCurrency conversion with live rates, your margins and the liquidity provider you choose.
Platforms that need it
Guides that go deeper
- What does it cost to launch a crypto exchange?Licensing, capital, technology, liquidity and people: where the money goes when you launch an exchange, and which of those costs depends on how you build.
- How to start a crypto OTC desk: RFQ, liquidity and licensingHow a crypto OTC desk works from request for quote to settlement, principal or agency, liquidity and pre-funding, and the licence it needs: MiCA in the EU, VARA in Dubai, the FCA in the UK.
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.