There are many kinds of brokers in the trading world, one of them is a no dealing desk (NDD) broker. The duty of this broker is to forward the order to the markets, financial agencies, banks, and other brokers.
A no dealing broker usually doesn’t use a certain spread, but it is fluctuating. It depends on the needs of the market. Many professional traders use this broker as it has no manipulation in its trading. The user in this broker can trade to face the real markets. There are three Forex brokers, namely, ECN, STP, and DMA. So, here are the characteristics of a no dealing desk (NDD) broker you should know as a trader.
ECN (Electronic Communication Network)
ECN asks the clients to participate in trading in a market. By participating, they know how to trade and learn about trading with others. There are banks, governments, institutions, and personal traders. There is a transaction at the same time in selling and buying without any intervention from the broker or the dealing desk itself.
This broker follows up the condition in the markets by knowing the seller and buyer (via online or realtime). Generally, the broker gets the profit from the commission or the mark-up spread.
On the other hand, ECN also has a lack of trading. It insists the trader not to do hedging, low leverage and has limited rules with FIFO. In addition, the trader will get a charge in giving a trading commission. Instead of it, this trader has an advantage in the spread. If the trader doesn’t get used to using ECN, so the feature is limited to STP No Dealing Desk. You need to highlight that not all the brokers are real. One of the premium brokers is Interactive Brokers.
STP (Straight Through Processing)
STP is used for connecting the trader with the other broker’s companies as the liquidator. Usually, STP executes the order by forwarding it to the big broker (institution) or to some of the ECN brokers.
However, if the STP broker is forwarded to the Dealing Desk broker, so the order depends on the broker which is addressed for. The order transaction uses a quota base from the liquidator.
DMA (Direct Market Access)
DMA (Direct Market Access) is almost the same as the ECN and STP. The difference is that DMA has a contract with a certain liquidator. The transaction used is the Best Rate base from the liquidator.
Generally, an unregulated broker calls STP is the same as ECN or DMA, even it is a little bit different. Therefore, STP uses the other brokers as the liquidator (the execution depends on the quality of the broker’s liquidator and the connection of the routing).
The different thing from ECN is that ECN doesn’t give the order to another broker, but it directly orders to the big banks (multi inter-bank), other traders, and the real markets which provide the buyer and seller without intervention from the no middlemen.
