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Types of Brokers: NO Dealing Desk Brokers

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There are different types of HQBroker Review out there. One of them is the dealing desk broker, which are also known as market makers. They forward your orders to the dealing desk and “make the market” for you.

Meanwhile, there are also the so-called “no dealing desk brokers,” which, as the name suggest, do not forward your orders to any dealing desks.

They do not take your trades’ other sides because they merely link two parties together.

Let’s dig deeper into this kind of broker, and see if it’s the kind that will suit your trading personality.

What are No Dealing Desk Brokers (NDD)?

As we have mentioned, NDD brokers simply link two parties together. They act like bridge builders while either charging a very small commission for trading or putting a markup by slightly increasing the spread.

No Dealing Desk broker can be further subdivided into STP or STP+ECN brokers.

What are STP Brokers?

STP brokers, or Straight Through Processing brokers, Finance Magnates HQBroker Review that have an STP system that routes the orders or their client—your order—directly to their liquidity providers. These liquidity providers are entities that have access to the interbank market.

No Dealing Desk Straight Through Processing brokers typically have many liquidity providers. And each of these providers quote its very own bid and ask price.

Liquidity Providers

Suppose your NDD STP broker has three different liquidity providers, and in their system, you can see three different bid and ask price quotes.

Your broker’s system will sort these quotes from the best to worst. The best bid price will be that with the highest selling price, and the best ask price will that with lowest buying price.

Your broker wouldn’t charge you with those exact price on their system. Rather, they will add a small, normally fixed markup, which can be 1 pip.

Obviously, the bid/ask quote changes a lot. This is also the reason why a huge portion of straight through processing brokers have variable spreads. In the event that their liquidity provider’s spreads widen, the NDD STP brokers are left with no other choice but to widen their spreads too.

Always bear in mind that even if some NDD STP brokers are offering fixed spreads, most of them have variable spreads.

What are ECN Brokers?

On the flip side, we have ECN brokers, too. These kinds of brokers let your orders to interact with the orders of their other clients, who all participate in the ECN.

These participants could be banks, hedge funds, retail traders, and even other brokerages. In a nutshell, participants are trading against each other. How? By offering their best bid and ask prices.

Further, ECN brokers let their clients to see the “Depth of Market,” which displays where the buy and sell orders of the other participants are.

Due to the nature of ECN, it’s very tough to slap a fixed markup. This means that ECN brokers get their efforts compensated through a small commission.

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