Understanding the Different Types of Forex Brokers
An important thing to consider when you open a retail forex trading account is to choose from the various types of forex brokers available to manage your forex transactions. This matters because it talks about a key decision– the kind of forex broker you select may have a lasting impact on the quality of service you get in addition to other costs such as your transaction fees and dealing spreads. Read More MultiBank Group
3 Main types of Forex brokers
When we talk about the main consideration of the kind of forex broker to pick on the basis of their forex quotations, you have three top choices: no-dealing desk, market-making, and electronic communications network brokers. The leading examples of such forex brokers are:
- No Dealing Desk
- Market Maker
- Electronic Communications Network
Every forex broker would have their own unique way of handling transactions and carrying out orders. Read on to learn more about these top three basic types of forex brokers and their main transactional qualities as well as distinctions:
NO DEALING DESK FOREX BROKERS
The No Dealing Desk or NDD refers to the kind of forex broker which doesn’t involve a dealing desk, just like the name suggests. Nevertheless, it continues to provide the choicest composite quotes which are accessed via multiple forex quote providers which allow the NDD broker the kind of liquidity it requires in the forex market.
In general, every provider puts up their best markets with the NDD forex broker. The broker next carries out transactions, looks at and fills orders on behalf of their clients accordingly. The NDD forex broker typically may charge a commission or have a broader bid/offer spread to be able to make a small profit on every trade that’s executed. In certain cases, they could do both.
A forex market maker would provide their customers with a two-sided market that stems from a specialist forex trader who functions as an extension or a part of the broker’s dealing desk. In case the price is dealt with, the broker would also take up the opposite side of a certain transaction from their client by purchasing on their bid side or selling on their offer side of the rate they quote.
The market maker’s goal is to get a hold on a part of the spread and to do considerable volume on both sides of the market to not have accumulated risk with another professional counterparty. Know more about MEX Group
Additionally, in case the trade executed is considerably large, the market maker may look at offsetting the trade right away, particularly if they think the market may not work in their favor.
ELECTRONIC COMMUNICATIONS NETWORK (ECN) FOREX BROKERS
An Electronic Communications Network or ECN forex broker typically doesn’t work with a dealing desk of its own. Rather, the broker offers an electronic trading platform where professional market-makers at banks, traders, and also other forex market participants may enter bids and offers via their system.
A benefit that several ECNs offer is that the trader who posts the price could enjoy a certain level of anonymity.