There are two main types of Forex brokerage firms: Dealing Desk and No Dealing Desk:

(I) Dealing Desk Brokers (DD) or Market Makers

(II) No Dealing Desk Brokers (NDD)

Each type of brokerage offers a different order structure, as outlined below.

 

(I) Dealing Desk (DD) or Market Makers

Dealing Desk firms are also known as Market Makers. This type of brokerage typically offers fixed spreads and charges no commissions. Dealing Desk firms earn profits from the spread between the bid and ask prices. In fact, they always take the opposite side of their clients’ trades. They quote bid/offer prices in a way that allows them to offset market risk through opposing orders. This type of Forex brokerage is often criticized for high slippage, price manipulation, and stop-hunting practices. Market Makers are generally suitable only for Forex beginners and possibly semi-advanced traders.

(II) No Dealing Desk (NDD) Forex Brokers or Agents

No Dealing Desk brokers give their clients direct access to the Interbank Market without using a Dealing Desk. True NDD brokers do not require order confirmation, and their transactions are executed immediately without delays. This benefits clients, especially those trading during news events. No Dealing Desk brokers make money by widening the bid/ask spread and/or charging trade commissions. Some NDD brokers do not charge commissions and earn only from the spread, while others offer zero spreads and charge only commissions. The advantage of trading with NDD brokers is that there is no conflict of interest between the broker and their clients. No Dealing Desk brokers can be either ECN or STP, and some operate as both. NDD brokers are suitable for all types of traders, including day traders, swing traders, news traders, and position traders.

Here are the basics about ECN and STP Forex Brokers

1) ECN FOREX BROKERS

ECN (Electronic Communications Network) brokers offer a marketplace where participants—traders, market makers, hedge funds, and banks—trade against each other. ECN Forex brokers essentially transfer trading orders directly to the Foreign Exchange market. These orders interact with other trading orders, allowing transactions to be executed.

• All ECN trading orders are matched in real-time.
• A true ECN Forex broker provides clients with a Depth of Market (DOM) data table (as shown in the picture—MT4).
• Another advantage of ECN trading is that it offers Forex traders full anonymity.

🔗 Compare Brokers: » ECN Brokers

2) STP FOREX BROKERS

STP, or Straight-Through Processing, refers to the method of sending retail trading orders directly to liquidity providers without any Dealing Desk intervention.

An STP broker does not interfere with order processing.

Typically, STP brokers rely on large banks as their liquidity providers—the more liquidity, the better.

STP Forex brokers generally offer transaction speeds between 70 and 150 milliseconds.

🔗 Compare Brokers: » STP Brokers

Types of Forex Brokers

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