Dealing desk vs non-dealing desk brokers

Dealing desk brokers provide their own prices for the traded currency pairs in their capacity as market makers. They do not execute their clients’ orders on the interbank market, but bring sellers and buyers together internally. They also hedge their customers’ positions. This process is called hedging. The exchange rates provided by these brokers may differ significantly from the exchange rates provided by the interbank market.

Non-dealing desk brokers cooperate with partner banks connected through the interbank market, from which they receive their rates. Each of these partner banks provides its own rates and the broker always offers the most favorable rate to its clients. Non-dealing desk brokers are further divided into STP (Straight Through Processing) brokers and ECN (Electronic Communications Network) brokers. Both brokers obtain their quotes through interbank trading, but STP brokers earn on the spread, while ECN brokers charge fixed commissions with each order. STP brokers trade with fixed spreads under regular market conditions (EUR/USD 2 pips), while ECN brokers trade with variable spreads, which consists of the interbank spreads and the corresponding pips.