What are the different types of Forex brokers?
Posted by Homi .M on 22 November 2012 01:27 PM

The types of Forex brokers: ECN - STP - NDD - DD


Forex Brokers

DD - Dealing Desk:
A dealing desk broker is a Market maker, typically offers fixed spreads and may elect to quote above or below actual market prices at any time.
Market makers are always the counterparty of the trader, who does not trade directly with the liquidity providers.
Market makers get paid through the spreads, and they usually also take the opposite trades of their clients prior to covering themselves (or not) with regards to the liquidity providers.
NDD - No Dealing Desk:
An NDD Forex broker provides direct access to the interbank market; it can be an STP or STP+ECN broker.
There is no requoting of prices, which means that you can trade during economic announcements without any restrictions.
The spreads offered are lower, but they are not fixed, so they can increase significantly when volatility is increasing during major economic announcements.
An NDD broker can either charge a commission on each trade or choose to increase the spread. 

STP - Straight Through Processing:
In STP mode, transactions are fully computerized and are immediately processed on the interbank market without any broker intervention. 

ECN - Electronic Communication Network:
ECN brokers provide and display real-time order book information (featuring the orders that were processed and the prices offered by banks on the interbank market).
They thereby improve market transparency by providing information to all market participants. ECN brokers usually make their money by charging a commission on the traded volume.
With ECN brokers, all transactions are directly processed on the interbank market in No Dealing Desk mode.
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