Forex brokers fall into one of two major categories being dealing desk brokers (known as market makers) or no dealing desk (NDD) brokers. Different pricing and commission fee structures are available with the two types of brokers, meaning it is important to know how your broker is executing orders.

Dealing Desk Brokers

Via a dealing desk, market makers use their own internal liquidity to fill your orders while setting their own bid-ask prices. As discussed more in the next section, market maker brokers offer commission free forex trading. Rather than paying an additional commission fee on top of the spread, market makers widen their spreads to compensate for their brokerage services. Some forex traders believe market makers lack transparency, as they are the counterparty to your trades and therefore profit off your losses.

Market Makers Australian Brokers Guide 2021

No Dealing Desk Brokers

NDD brokers use either straight-through processing (STP) or electronic communications network (ECN) technology to execute orders, with some brokers using a combination of the two. With no dealing desk interference, NDD brokers pass your orders directly onto external liquidity providers that fill your order and are the counterparty to your trade. As multiple top-tier liquidity sources are utilised, NDD brokers can offer ultra-tight spreads and fast execution on par with an institutional grade trading environment.

NDD Australian Brokers Guide 2021

The key distinction between ECN and STP brokers is the control the broker has over the external liquidity sources. ECN brokers have no control over the liquidity provides they use, while STP brokers retain some control.

ECN STP Australian Brokers Guide 2021

Dealing Desk vs NDD Brokers

The two types of brokers suit different levels of trading experience and trading strategies. If you are a beginner trader wanting a simple fee structure, market makers offer a soft entry into forex trading. Yet, if you are an experienced trader wanting to execute day trading, scalping or algorithmic trading strategies, NDD brokers offer tighter spreads and faster execution speeds.

Trading Account Types and Spreads

Depending on whether your broker is a market maker or NDD broker, you will have the option of two main pricing structures when trading forex.

  • NDD Brokers – Offer commission accounts where you pay the forex spread + a round turn commission fee.
  • Market Makers and NDD Brokers – Offer commission free accounts where you pay the forex spread + no commission fees.