There are two types of Forex Brokers, Dealing Desk and No Dealing Desk. This article will differentiate these 02 types of Forex Brokers. Hope with the information in the article, you will be able to choose better Brokers to trade.
There are 2 main types of Forex Brokers:
Dealing Desk – DD: known as Market Makers
Dealing Desk Brokers usually offer fixed spreads. Their income comes from Spread and usually from reciprocal trading with customers.
These DD Brokers are called Market Makers
Dealing Desk Broker creates a market for traders. That means: when you want to buy, they will sell to you, when you want to sell, they will buy for you
They are always in the opposite position with you.
No Dealing Desk – NDD: subdivided into two types:
+/ Straight Through Processing (STP)
+/ Electronic Communication Network + Straight Through Processing (ECN+STP).
No Dealing Desk – the name clearly shows the type of Brokers, they will not transfer your order to a Dealing Desk.
This means they are not in a position opposite to the customer’s transaction. Their task is simply an intermediary linking the two sides together.
No Dealing Desk is not a Market Maker.
NDD is like bridge builders: They build a structure, a platform that can support customers and most other units to connect with each other although this is quite difficult and complicated.
NDD may charge a small commission for Spread-based transactions or increase Spread spreads slightly.
No Dealing Desk can be STP or STP + ECN.
What is STP broker?
Forex STP Brokers have a routing system that supports customers’ orders directly to their liquidity providers – which have access to the interbank market.
No Dealing Desk STP Broker usually has many liquidity providers, with each provider offering different Bid and Ask rates.
The more liquidity providers in the system, the easier it is for the client’s order to match the price. But the important thing is that you can trade directly and truly on the market without having to be mediated by the broker.
What is ECN broker?
A True ECN Forex trading platform will allow their trading orders to interact with trading orders of other partners and customers in the same ECN system.
ECN partners can be banks, small traders, hedge funds and even other brokers. In essence, participants transact with each other by providing the best Bid / Ask price.
ECN also allows their customers to see “Depth of Market”.
Due to the nature of ECN, it is difficult to increase spreads to earn income, so forex ECN brokers often earn income through a commission.
>> Read more: Best forex brokers
What types should choose?
What type of exchange should I choose? A Dealing Desk Broker or No Dealing Desk Forex Broker?
This depends entirely on you. An NDD type broker will not necessarily be better than DD, depending on the type of trade you choose.
It is also up to you to decide whether you have a lower spread but pay a commission for each trade, or a higher spread and no commission.
Typically, Scalpers with trading strategies of the day will prefer the Exchanges with low Spread because with Scalpers they will trade according to the Intraday strategy, the level they want to achieve in each transaction is only 20-40pips. .
Meanwhile, large spreads tend to be insignificant for long-term investors with large amounts of money. They will trade a large Spread so that they do not have to pay a large Commision on their transaction amount.
Synthesized by top4forexbrokers.net
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