The liquidity providers are not oblivious and are definitely not stupid. They pay close attention to their incoming order flow and look for patterns.
The main thing (I think) they look for are parties who spread a large order through multiple channels trying to take in more than what the real market liquidity us actually offering. Keep in mind that at the end of the day there are less than 10 big banks providing a high percent of the total liquidity to non-bank users. So you can have an IB account, and a SAXO, Oanda, FXCM, etc account, hit each one for 5 million and all those orders end up at one bank who is suddenly sitting on 30M instead of the 5 they are comfortable handling.
It is just a matter of time before some hedge fund triggers some massive price discontinuity by connecting to the liquidity pool over 20 different providers, hitting all at the same time for 10-20M at some sensitive time. All the banks will run to hedge against a suddenly vacant market and we'll see 50+pip up/down drafts.
We haven't had a problem yet on IDEALPRO. The liq providers are big boys and know that it is their job to keep their systems fast. Their solution if they feel their system is being misused will be to widen their prices which means they will get less orders and have less opportunity to make money. They understand the issues quite well and how to balance the various factors.
