What Is the Primary Difference between an LP and a “Broker” in Derivatives Trading?

A Liquidity Provider (LP) acts as a principal, taking on the risk of the trade by becoming the direct counterparty to the liquidity seeker. They profit from the bid-ask spread and their ability to manage the resulting risk.

A "broker," on the other hand, acts as an agent, facilitating the trade between two parties (or between a client and an LP) without taking on the risk themselves. A broker's primary revenue is typically a commission or fee.