They take the opposite side of the trade. Dealing desk brokers are able to profile their clients. They divide clients into groups systematically with algorithm. Forex market makers vs for losing clients: Broker automatically take the other side.
Losing trades of clients are counter-traded and become brokers’ profit. More losing traders means more profit for the broker. Automation for winning clients: Broker automatically take the other side and then hedge the position in the real market that they have access to. This is also done automatically through algorithm. Makes money through spreads and when a client loses a trade.
Traders can’t see the real market quotes. Transparency of dealing desk brokers differ depending on their own company rules. Providing access to the interbank market without dealing desk. No re-quotes and no additional pausing when confirming orders. Clients’ orders are executed automatically, immediately and anonymously.
There is no dealing desk watching you orders. Because all Participants or liquidity providers compete for prices in a real market. They take the opposite side of your position, and looking to make money by closing this position later in a trade with another party. More LPs usually means more depth in the liquidty pool,thus better spreads. Maintenance costs is lower, but the broker become completely dependent on the one LP. Most STP Brokers has a predetermined number of liquidity providers.
ECN brokers have a large number of liquidity providers. They add small mark-ups on the best bid and ask rates they get from LPs. For example, adding a pip to the best bid price or subtracting a 0. More liquidity providers means more liquidity and better fills for the clients. The fixed spreads they charge are higher than the best quotes they get from LPs. Forex DMA refers to electronic facilities that match orders from traders with bank market maker prices.
It enables buy-side traders to trade in a transparent, low latency environment. Orders go to the market,and are filled based on available quotes from LPs. Orders don’t go to the market. Some STP Forex brokers fill clients’ orders though Instant execution,after which they hedge these orders with their LPs in order to make profits.
If there are no profitable hedging opportunities when traders submit their orders,they may experience re-quotes. The broker is not a market maker or liquidity destination on the DMA platform it provides to clients. Anonymous platforms ensure neutral prices reflecting global FX market conditions. DMA brokers have more liquidity providers thus better prices for clients. DMA model allow all trading style:scalping,news trading, swing trading,position trading etc. Allow clients’ orders to interact with each other. Orders are matched between counter parties in real time.