Mason Dean Capital FOREX Blog

Mason Dean Capital FOREX Blog

Dealing Desk Vs. Non Dealing Desk

 Dealing Desk Vs. Non Dealing Desk

 

 Dealing Desk Vs. Non Dealing Desk is always an ongoing debate in the FOREX world.

There are many misconceptions that are derived from this conversation for which we will address in this article. First of all, lets outline the definitions


Dealing Desk (Market Makers)

Dealing Desks (Market Makers) have the following characteristics:

- The spreads are fixed

- Orders are filled on a discretionary basis

- The trade is filled by the broker taking the opposite side of the trade

Non Dealing Desk  

Non Dealing Desks are split between Straight through Processing and ECN (Electronic Communication Network).

STP - Straight Thru Processing

STP - Straight Thru Processing include the following characteristics:

- Variable spreads

- connects client and LP (Liquidity Provider)

- Quote are from LP

ECN

ECN = Electronic Communication Network and is a computer network that disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part. The most popular product traded through ECNs are stocks and FOREX

ECN provide:

Variable spreads or commission fees

A bridge between client and LP as well as other traders

Price quotes derived from LPs and other ECN Members

Depth of market available

Misconceptions

Misconceptions include:

(1) ECNs are STP

ECN is different than STP as Straight Thru Processing (STP) brokers simply place your trade order to the next counterparty which can be all of the three types of brokers: ECN, Market Maker or again STP.

 

(2) FOREX Brokers are out to get the client by stop hunting and that client losses go right into the broker's bank account. This is the LARGEST misperception. The market maker broker (For instance Gain Capital) takes all its clients positions and form a large single net position which is then taken in or out of the pocket or hedged with other counterparty.

 

It is the recommendations of Mason Dean Capital to use a market maker such as Gain Capital for all retail FOREX trading.

 

 

 

 

 

 

Comments (1) -

  • Brian

    1/31/2017 12:06:03 AM | Reply

    This is a really helpful article. I appreciate your input. I have been reading everything I can find on the internet to help me out before i dive in to this stuff and this is the first good explanation the Dealing Desk I found. Thank you and keep it up!

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