One of the first steps any aspiring Forex Trader must do is decide on their choice of a Forex broker.  This is a very important decision and should be considered carefully.  There are several different types of Forex Broker models, but broadly speaking, they will typically fall into two main categories – Dealing Desk Operations (DD) and Non-Dealing Desk Operations (NDD).

Dealing desk forex broker

As the name suggests, a dealing desk forex broker is a market maker. This type of an execution model is largely profitable for the forex broker. Depending on a trader’s trading style and pattern, dealing desk brokers can opt to take the position of your counterparty.

The reasoning behind this is because many beginners in forex trading lose money. Thus, it makes more business sense for a dealing desk broker to keep these profits in-house. There are many automated risk platforms that a forex broker can use which can quickly categorize the trader into a winning or a losing trader.

But a dealing desk broker is not all that bad. As a market maker, they are the ones who provide the liquidity to you when it is much needed. So, whether you wake up at the middle of night and want to trade, you will be able to execute your trades.

Of course, the downside with this is that you have to pay a spread every time you trade. This spread is basically the cost of trading with your forex broker. In all fairness, the forex broker does take a risk, every time they become your counterparty. Some of the commonly used terms in marketing by market maker brokers are calling themselves, fixed spread brokers.

Non-dealing desk broker

A non-dealing desk broker acts exactly as it suggests. They are your broker in executing trades on your behalf. A non-dealing desk broker is often the preferred choice for traders. This is because they charge a commission per trade (and at times even a spread).

With a non-dealing desk broker, there is no conflict of interest from the forex broker. The way non-dealing desk brokers make money is by the volume of trades that you make. Obviously, the more you trade, the more fees that you pay to your forex broker.

Thus, in this aspect, the forex broker is not really interested whether you win or lose, as long as you make a steady number of trades. Over the years, traders have chosen to trade with a non-dealing desk broker for the very reason of conflict of interest. In

A non-dealing desk broker goes by other names such as ECN/STP broker or agency model. In this model, as we discussed in the previous section, the forex broker only passes your order into the liquidity pool. Traders often prefer the second model, the STP model. This is because of the fact that the broker doesn’t take an opposite position in the markets.

 

Below is a comparison between the dealing desk and non-dealing desk broker:

Dealing desk broker	Non-dealing desk broker
Acts as a market maker and thus buys and sells to you	Acts as an execution platform and passes your trades into the liquidity pool
Usually charges a higher spread	Spreads can vary depending on the liquidity providers being used
There is a conflict of interest with a dealing desk broker	There is no conflict of interest with a dealing desk broker
Spreads are the only fees that you will pay	You will be charged a commission per trade and in some cases a spread too
Higher chance that you get a good price fill	Price fill basically depends on the liquidity pool
Generally, a dealing desk broker doesn’t allow trading around news releases	All types of trade executions are allowed