How Prop Firm Liquidity Providers and Order Routing Really Work
Prop firms don’t send every trader’s order directly to the exchange. They use liquidity providers, routing agreements, or simulated fills depending on whether you’re in an evaluation, a funded account, or a paid-performance account. Here’s how execution actually works behind the curtain.
Why Execution Routing Matters
Your fills, slippage, and legitimacy as a trader depend on how orders get routed. Most traders have no clue how the plumbing works, which is why they blame the wrong things when executions feel off.
- Simulated fills in evaluation
- Aggregated routing in funded stages
- Real exchange routing in paid-performance accounts
If you want context on how rules get enforced around execution quality, see automated rule monitoring.
Simulated Fills in Evaluations
Most evaluation accounts do NOT route your trades to real liquidity. These fills are simulated using exchange data and internal engines.
| Aspect | Simulated Behavior |
|---|---|
| Fill price | Calculated from bid/ask data |
| Slippage | Modeled from real-time volatility |
| Partial fills | Rare unless firm simulates depth |
This keeps costs down for the firm while testing if you can trade responsibly.
Aggregated Routing in Funded Accounts
In most firms, funded accounts still don’t send your trades 1:1 to the exchange. Orders go into an aggregation system where the firm decides which trades to mirror, offset, or hedge.
- Low-risk trades may be mirrored
- High-risk trades may be hedged
- Unprofitable traders may be fully simulated
This hybrid model protects the firm from traders who blow out instantly once real execution kicks in.
Real Exchange Routing for Paid-Performance Accounts
The top tier of prop firm accounts routes orders directly to the exchange. This is where fills feel “real” because they are. You get authentic:
- Depth-of-market interaction
- True slippage
- Actual queue position
- Partial fills
Execution quality here is identical to trading with your own brokerage account.
The Role of Liquidity Providers
Liquidity providers bridge the gap between prop firms and the exchange. They manage risk and facilitate fills for large volumes without hitting the public book directly.
- Reduce slippage on large orders
- Provide synthetic liquidity for evaluation accounts
- Smooth out volatile fills during news events
Providers may also supply data feeds, matching engines, or execution algorithms.
Why Execution Feels Different Across Firms
Execution differences come from:
- Which LPs a firm partners with
- How simulated their evaluation fills are
- Whether your account is hedged or offset behind the scenes
- What routing path your stage uses
It’s not “manipulation”; it’s infrastructure.
The Bottom Line
Prop firm execution isn’t black magic. Evaluations use simulation, funded accounts use routing pools, and paid-performance accounts use real exchange access. Understanding this pipeline lets you interpret fills correctly and avoid blaming the wrong thing when volatility smacks your entries around.