FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%

FXCC: ECN vs. Dealing Desk


24 September 2021

So what are the critical differences between an ECN/STP broker and dealing desk brokers, who are often referred to as market makers? We have compiled a simple table of pros and cons, in order to outline the key points of difference between ECN/STP brokers and dealing desk/market making brokers, but we thought we could also go that extra mile in order to explain the difference in more detail.

With an ECN/STP model the spreads are variable, depending on the true market conditions at any given time and the quotes provided by the liquidity providers; consisting of major banks and institutions who contribute to the electronic configured network. Traders pay a small transaction fee per trade and there is generally no commissions charged. With the ECN/STP broker they become a bridge, a conduit between the trader and the market. The trader gets straight through to the market via the electronic configured market place with no barrier, no interference and no intervention. The prices come from the network, a liquidity pool created by the contributors.

Forex ECN Trading Model vs Fixed Spread Forex Broker Trading

Feature Explanation ECN Trading Model Fixed Spread Broker Platform
Anonymity

On dealer forex trading platforms, the dealer knows your open positions, trading style and tactics and can use this information to his advantage.

+ -
Client-To-Liquidity
Trading

On the FXCC ECN, you can trade instantly on prices streamed by leading Financial Institutions.

+ -
Re-quotes

Re-quotes are common in traditional spread trading. FXCC does not re-quote. The platform’s technology and strict price/time dealing protocol are designed to fill your trade at the current market price.

- +
Conflict Of Interest

FXCC doesn’t take positions against its clients at all.

- +
Trading During Economic Releases

FXCC allows all clients regardless of forex trade size to trade and put in new orders during key economic releases. During these releases, and at times of unusual market volatility, bid/offer spreads are wider than those available during ‘normal’ market conditions.

+ -

Which trader type are you?

Whatever type of trader you consider yourself to be: part time, full time, or hobbyist and whatever your level of experience there is one constant that applies to trading, that is as relevant to new traders as it is to the highly experienced; a professional attitude towards trading always wins through. Traders should always, irrespective of their trading experience, approach the discipline of trading with the utmost diligence and professionalism.

Choosing the Right Broker is of utmost importance

The type of broker you choose is a critical decision, which will have a profound impact on your potential success. Should you choose a dealing desk broker, or a no dealing desk broker? It is a straightforward choice and question, and one we will answer immediately. Serious, committed traders, who have developed a professional outlook and approach, should only choose the ECN/STP trading model every time and we will outline some of the reasons why. Firstly, the majority of FX traders are day traders or scalpers - whose trades can last from seconds, minutes, or hours these FX traders rarely hold FX trades overnight. Therefore it should be a simple decision to decide whether you would rather have tighter spreads, but pay a commission per trade with an ECN/STP broker, versus wider spreads and (theoretically) pay no commissions.

Dealing desk traders "make the market", their own market. They are at liberty to quote their own synthetic price (depending on a list of their variable conditions) which could include how thin their liquidity is, based on the volume of business they are conducting on behalf of their customers. Therefore their quotes are artificial quotes.

Dealing desk spreads are often fxed, which can appear attractive if they are quoting a fixed spread of, for example, one pip on EUR/USD. However, traders may experience slippage and poor fills, meaning that the reality is they are being filled so far from the true market price that the spread is closer to two, or three pips per transaction. The dealing desk broker can also delay filling the order in an attempt to get the best price for the broker.

However, by far the biggest difference between dealing desk brokers and ECN/STP brokers is the fact the dealing desk brokers in effect bet against their customers. If the dealing desk client wins then the broker loses, they are effectively betting against the client. Now whilst an argument could be put forward that with huge volumes the dealing desk broker is neutral in terms of the outcome, the fact remains that a dealing desk broker is taking a position looking to profit if the client loses.

With the ECN/STP model there is never any re-quotes, all orders are filled at the best possible price at any given time. Occasionally these quotes can be incredibly good value, as low as a small percentage of a pip, perhaps 0.1 depending on the volume of activity within the ECN and that brings us to another key benefit of trading via an ECN/STP broker; the depth of market.

#source

Related

FBS Broker Releases New Partner area for its IB Program users
FBS Broker Releases New Partner area for its IB Program users

An internationally acclaimed broker, FBS, released updates to its award-winning Introducing Broker program. The broker added features that allow tracking statistics...

27 Oct 2021

FxPro has added over 2000 new shares on MT5 platforms
FxPro has added over 2000 new shares on MT5 platforms

The global broker FxPro has carried out the largest expansion of its asset line in the company's history! The range of financial instruments on the MetaTrader 5 platform...

26 Oct 2021

Meet the new cent account on FreshForex
Meet the new cent account on FreshForex

We present you a new type of cent account - Pro.Cent. What is its feature and what will happen to the old account? The previously available cent account...

25 Oct 2021

Trade CFDs on 900+ of the Biggest Companies this Earnings Season with HotForex
Trade CFDs on 900+ of the Biggest Companies this Earnings Season with HotForex

Traders with the internationally acclaimed multi-asset broker HotForex can trade CFDs on the stocks of over 900 companies during Earnings Season with tight spreads...

22 Oct 2021

Fintech Exinity launches innovative solutions
Fintech Exinity launches innovative solutions

Exinity, the new wealth engine with an ambition to unlock the value of risk-driven trading for ambitious individuals, today launched two new trading and investment solutions...

21 Oct 2021

Trade cryptocurrencies 24/7 at AMarkets
Trade cryptocurrencies 24/7 at AMarkets

Starting October 23, you can trade cryptocurrencies around the clock. Now, the AMarkets crypto trading conditions are in no way inferior to those at popular crypto exchanges...

21 Oct 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
AvaTrade information and reviews
AvaTrade
76%
LegacyFX information and reviews
LegacyFX
75%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.