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STP/ECN Forex brokers
Do you know another STP/ECN Forex broker? Please suggest by adding a comment below.
Forex brokers: ECN vs STP vs NDD vs DD
DD — Dealing Desk — Forex brokers that operate trough Dealing Desk, used a fixed spread platform where a desk makes money via spreads and by trading against its clients. A Dealing Desk Forex broker is called a Market Maker - they literally "make the market" for traders: when traders want to sell, they buy from them, when traders want to buy, they sell to them, e.g. they will always take the opposite side of the trade and in this way "create the market". A trader doesn't see the real market quotes, which allows Dealing Desk brokers (Market Makers) manipulate with their quotes where they need to in order to fill the client.
NDD — No Dealing Desk — NDD Forex brokers provide access to the interbank market without passing orders trough the dealing desk. No dealing desk brokers work with their market liquidity providers, primarily banks to get better competitive bid and ask prices. With true No Dealing Desk brokers there are no re-quotes on orders and no order confirmation. This, in particular, allows traders to trade during news time with no restrictions on trading.
An NDD broker can either charge a commission for trading or choose to increase the spread and make trading commission free.
No Dealing Desk brokers are either STP or ECN+STP.
STP — Straight Through Processing — STP Forex brokers send orders directly from clients to the liquidity providers. The more there are banks and liquidity in the system, the better the fills for the clients.
The fact that traders have access to the true market and can execute trades immediately without dealer intervention is what makes the platform STP.
ECN — Electronic Communications Network — ECN Forex brokers additionally allow client orders interact with other clients' orders. ECN Forex broker provides a marketplace where all its participants (banks, market makers and individual traders) trade against each other by sending competing bids and offers into the system. Participants interact inside the system and get the best offers for their trades available at that time. All trading orders are matched between counter parties in real time. Often a small fee is applied.
Sometimes STP brokers are discussed as if they were ECN brokers. To be a true ECN, a broker must let clients show their own order size in the system and allow other clients to hit those orders. With ECN broker traders can see where the liquidity is and execute trades.
Among the main reason why traders look for NDD brokers is transparency, better and faster fills and anonymity.
Transparency means that a trader enters a true market instead of the market being artificially created for him.
Better fills are a result of the direct and competitive market bids and offers.
Anonymity means that there is no Dealing Desk watching who has come to the market and is asking for an order to be filled, instead client orders are executed automatically, immediately through the market network and totally anonymously.
On the opposite side is a Dealing Desk broker, who is able to profile their clients. In the worst case scenario, such broker can split clients into groups and put less successful ones on auto-execution and trade against them because on average they will lose, while clients that show signs of successful trading will be put on "slow-down" mode and can be provided with frequent re-quotes, slippage and/or slower execution especially during fast moving markets while a broker tries to offset own risks. The transparency of a Dealing Desk broker depends on the rules inside the company.
Forex Brokers aren't bad on general, whether a Dealing or Non-Dealing Desk, they aren't there to be against any particular trader. They look to make business, not just work for traders in terms of cooperation in the market environment. Many large Forex brokers who have lots of clients tend to try to help their clients become profitable as much as they can, but once a trading order is placed, its everyone for themselves.
Aburenad
December 9, 2008This is the first time I see a simple and clear information on DD, NDD, STP and ECN. I thought before that there are no differences between STP and ECN brokers. I even chatted with some brokers where they did not know about it (mostly those are DD brokers. Perhaps they claim that they do not know about it).
Thanks for your effort on this article
Best of luck
Aburenad
trader
December 17, 2008This turned out to be a very helpful article. Thank you very much!
trader
December 17, 2008Tradeview Forex and Thinkorswim are STP/ECN,
CHECK them out to confirm.
BrokerGuru
December 18, 2008Thank you.
We've checked. It turned out that:
Tradeview Forex has a dealing desk: most of their risk is passed through to the banks, but they may take risks on smaller positions which banks wont accept.
Thinkorswim is an introducing broker for Penson Fincancial - a dealing desk broker which Thinkorswim routes their orders to.
trader
December 19, 2008There has been some question as to MBTrading being an ecn? Anybody have any knowledge or experience? How can one verify the claims of a broker? Wouldn't they all claim to be stp or ndd since that is what it appears most forex traders are looking for?
tks
BrokerGuru
December 24, 2008Alright, the results and answers are in:
We asked several ECN brokers to explain "How one can verify the claims of a broker being an STP/ECN."
MB Trading replied:
"MB Trading Futures maintains orders anonymously using STP/ECN technology. The technology itself is modeled after the securities industry and facilitates best execution for you and generates price competition, which means traders can "skip the middle man" and save money, rather then using other traditional FCM’s using deal desk models. The firm accomplishes this by routing orders to banks and pools of liquidity to create a true “non-dealing” desk platform. Traders have the ability to route orders via fifteen order types to qualified destinations through our STP (Straight Through Processing) platform.
Since there is no central marketplace for forex, there is no website/regulatory group similar to that of securities for you to verify. The only thing I can suggest is to perhaps try out our demo so you can experience the ECN technology yourself to see the differences between deal desk methodologies and our model."
Taurus Global Markets replied:
"On trader/client side there is no way of knowing whether a company is an ECN or NOT. There are also company's that may be ECN part-time, 50%, 90% or Full-time. We on this matter are full-time ECN, as we (support) are more technicians managing TradeFLO® that connects from MT4 to Banks, etc."
BrokerGuru
December 27, 2008On top of everything said before, there are two simple rules to follow:
1. ECN brokers don't have fixed spreads, instead their spreads are variable. If a broker quotes fixed spreads - this is not an ECN broker.
2. ECN brokers charge commission for trading Forex. If a broker claims to charge no commission, it is not an ECN.
trader
January 2, 2009what about GFT? Where do they belong? STP, NDD, market maker... etc The broker was not mentioned in your list
BrokerGuru
January 3, 2009GFT is a market maker.
trader
January 13, 2009What about GFS Forex and Futures,
BrokerGuru
January 14, 2009They are STP.
We have listed all known ECN, STP Forex brokers. If a broker is not on the list, it means (in 99% of the cases) they belong to market makers group. The remaining 1% is mostly for new companies.
Update (May 10th, 2009): GFS has stopped providing Forex services since May 8th, 2009.
trader
January 14, 2009Are they /GFS/ trustworthy? Would you open an account with them?
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