Deutsche Bank research says more is not always merrier

Increasing the number of LPs in an aggregated environment can harm execution quality

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Winner's curse: this afflicts LPs that win trades in an aggregated, but crowded liquidity environment

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

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

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