What is a Dealing desk? What is a Non-dealing desk? What’s the difference?

This allows you to clear your profit and loss at your traded prices rather than discounting your trading P/L by the cost of the commissions to be paid. The liquidity providers of these brokers are open 24 hours a day, 5 days a week since they usually have trading desks in London, New York, and Tokyo. These Tier-1 banks are also the reason that FX markets are open all week round. Brokers that have access to their liquidity can, therefore, offer their services to their clients ecn vs stp during the same time frame.

Dealing Desk vs. No Dealing Desk Forex Brokers

As the name implies, a no dealing desk broker does not deal with the trades. Instead, they pass the trades to the interbank market where there are many liquidity providers who are willing to buy or sell any currency pair at any time. The no dealing desk brokers process the trades through a straight through processing (STP) system which automatically passes the trades to the liquidity provider. So, they don´t match their clients orders or take the other side of the trade. STP brokers are the most common in the forex market and they act as bridges to the retail forex traders because it is very hard for individual retail traders to get through to the interbank market. They find the best bid, ask for the spread on this market and offer it to the traders https://www.xcritical.com/ adding their commission which adds an extra 0.5, 1 or 2 pips to the spread.

What’s the Difference Between Dealing Desk and NDD Forex Brokers?

This liquidity pool can consist of banks, hedge funds and retail traders. Brokers that use a dealing desk may or may not intervene in the execution of orders, depending on the individual brokers execution policy. In most cases, dealing desk brokers keep trades safely within their own liquidity pools and do not require external liquidity providers. This means that dealing desk execution is mostly based on the trust you have in your broker.

Putin allows Russian banks under sanctions to halt some FX operations

In the long run, a well-established regulated broker wants its clients to be successful and continue trading as long as possible. Whether the Broker charges a commission or make their profit from a mark-up or the bid/ask spread they are always making money on the client’s trade, regardless of whether it’s a losing or winning trade for the client. Let’s first look at trading size; if you are a small retail trader, you have no choice but to go to a dealing desk broker. Usually, this aspect is not well advertised, but if the broker offers micro and mini lot orders, then it inevitably has a dealing desk.

On the other hand, if you are trading exotic currencies where liquidity is generally low, then a fixed spread broker will be there to make the market for you. This is because they charge a commission per trade (and at times even a spread). 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. No Dealing Desk describes a trading platform offered by a forex broker that provides unfiltered access to interbank market rates of exchange. If you are interested in starting forex trading or CFDs trading, choosing the right broker is the first step.

This can result in tighter spreads than fixed spreads offered by dealing desk brokers. The existence of a dealing desk in comparison to no dealing desk allows retail traders to access bid/ask spreads that are much tighter than had been previously the norm. This type of set up allows for bid/ask spreads as low as 0.02% or around 2.5 pips in EURUSD, the most traded currency pair worldwide. If you were to go to a bank to exchange your local currency into another, depending on where you live, and the currency you want to buy, the spread, or markup is much more likely to be around 0.5% or higher.

That means that in their trading platform system, they will see three different quotes of bid and ask prices for each of the currency pairs as below. As the name signifies, No Dealing Desk (NDD) brokers do NOT pass their clients’ orders through a Dealing Desk. Instead, NDD forex brokers send the buy and sell orders directly to the forex market (via liquidity providers, banks, other brokers, etc). ECN forex brokers have their client’s network with other orders in the ECN network.

There is a lot of controversy as to the possible conflict of interest for a broker with a dealing desk, where the broker is the counterparty to the client’s trade. The thinking goes that if you make money on the trade then the broker is losing money, which would appear a conflict of interest. That is true to a certain point, but is not necessarily always the case. Sometimes the broker may have quickly matched the trade with another client that has placed a trade with the opposite direction.

The bid price is the price at which they’re willing to buy the currency from the trader, and the ask price is the price at which they’re willing to sell it to the trader. The difference between the bid and ask prices is called the spread, and it’s how dealing desk brokers make their money. Non-dealing desk forex brokers, also known as straight-through processing (STP) or electronic communication network (ECN) brokers, connect traders directly to liquidity providers in the interbank market.

A non-dealing desk broker is a type of broker that does not take the other side of their client’s trades. Instead, they act as an intermediary between their clients and the interbank market, which is where banks and other financial institutions buy and sell currencies. These participants include, but are not limited to the dealing and non-dealing desk brokers. Look at the structure of the forex market in the context of a supply chain, where there is a producer, a wholesaler, retailers and the consumers. Individual traders are too small to participate in this level of trading. It is the NDD brokers who act as a bridge between clients and liquidity providers, so that individual traders can enjoy this direct trading experience in the interbank market.

If the market is rallying, and they are hit at the ask price, they may choose to close the trade immediately at the best price available from one of their liquidity providers. Dealing desk brokers often offer fixed spreads, which means that the spread remains the same regardless of market conditions. This can be beneficial for traders who prefer a predictable cost of trading. However, fixed spreads can be wider than variable spreads offered by non-dealing desk brokers. Tier-1 banks do not offer liquidity with tight bid/ask spreads for small sizes.

• It means that the trading platform will not expose the identity of the trader, and all orders will be executed immediately and anonymously.
• While dealing desk brokers have their advantages and disadvantages, they can be suitable for different types of traders, depending on their trading style and preferences.
• A non-dealing desk broker is a type of broker that does not take the other side of their client’s trades.
• The Non Dealing Desk broker uses the prices of other FX participants, usually banks, financial institutions and sometimes other traders to create the bid/ask quote.
• ECN brokers are usually compensated through small commissions instead of earning from spreads or markups.

The competition among brokers is so stiff that the rates offered by Dealing Desks brokers are close, if not the same, to the interbank rates. These are brokers in the forex market that do not fulfill the orders of their clients in-house, but rather transmit same to external venues for execution. These external venues could be the liquidity providers directly (so-called STP model), or to other prime brokers operating in the market who can absorb these orders (the ECN model). Many people think it is simply a desk in an office, manned by one person who sits down and monitors what the clients of a firm are doing.

If the price shifts into territory that will make it unprofitable for the dealing desk broker to do this, the broker will not execute. The prices from liquidity providers are used to create a bid/ask quote (black arrow), the broker then passes a retouched price to his client (gray arrow). The client can trade on these prices (blue arrow) usually electronically, using STP. The broker platform then passes the trade to the dealing desk (green arrow). It may sit on the trade, building up the position, or it may have enough volume to exit the position directly with its liquidity providers (orange arrows).

Dealing desks can also be found outside the foreign exchange markets, such as in banks and finance companies, to execute trades in securities and other financial products. They execute many financial assets like equities, ETFs, options, and commodities. With an NDD broker, given the speed of electronic networks, it is very rare in normal market conditions that the broker will show a re-quote when you hit the execute button on the platform. As the broker is not holding the position for itself, neither is it using a markup, trades are usually executed at the given price.

A dealing desk (DD) in a forex brokerage is a department that is dedicated to the matching and fulfillment of orders of their clients, using positions that have been acquired from the interbank market. In other words, a forex trader who trades forex with a dealing desk broker will have all pricing and order execution performed from the broker’s back end and not at the interbank market. The dealing desk is actually a fully staffed department responsible for taking and executing clients’ orders in a manner that constitutes minimal risk to the firm. Non-dealing desk brokers often offer variable spreads, which means that the spread changes according to market conditions.

I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Dealing Desk brokers literally create a market for their clients, meaning they often take the other side of a clients trade.While you may think that there is a conflict of interest, there really isn’t. Look for brokers that are regulated by a reputable authority, such as the Financial Conduct Authority (FCA) in the UK or the National Futures Association (NFA) in the US. Read reviews from other traders and check the broker’s history of regulatory action.

Unlike market-making brokers, this trading model of ECN brokers ensures that there is no conflict of interest, as they get their commission whether you make or lose money when trading forex. The prices you see on your forex trading platform are live quotes from global banks, which means that with an NDD broker, the price you have when you click is the final price for your position. Forex brokers that have an STP system route the orders of their clients directly to their liquidity providers who have access to the interbank market.