Dealing Desks (DD) vs No Dealing Desk (NDD) Brokers

To Clarify the differences and terminology of the different Broker types and trading conditions they provide traders.
If you been reading about forex trading you must have come across the acronyms DD, STP, DMA, NDD & MM. I’ll try clarify the differences and try to put something to remember each and their meanings.

Keynote:
A Dealing Desk (DD) broker, also known as a Market Maker (MM)
A No Dealing Desk (NDD) is also referred to as Straight Through Processing (STP) or Direct Market Access (DMA) and closely related to an ECN.

Dealing Desks (DD)

A Dealing Desk (DD) broker, also known as a “market maker,” is a type of forex broker that acts as a counterparty to their clients‘ trades. This means that when a trader places a trade with a DD broker, the broker is essentially taking the other side of the trade.

Market makers are also known as dealing desk brokers. This is due to the fact that they generate revenue through spreads and providing liquidity to their clients (You! ), typically by taking the opposite side of their trades.

In other words, they create a market by countertrading your buy and sell orders.

There are trading desks that may fill your orders at their discretion based on whether or not their own opposing position could be advantageous for them, but this is not always the case.

Dealing Desks (DD) bid/ask quotes

Ideally, market makers adhere to their stated bid/ask quotes and fill client orders regardless of the performance of the positions.

Before accepting a countertrade or passing it on to a liquidity provider, dealing desk brokers typically attempt to obtain a matching long or short order from another client. A liquidity provider is typically a large business that can quickly purchase or sell a financial asset.

As a result, they are able to limit risks by profiting from the spread rather of taking the opposing side of the client’s transaction.

How do Dealing Desks (DD) Brokers Make Money?

DD brokers make money by taking the opposite side of a client’s trade and earning the spread, or the difference between the bid and ask prices. They also have the ability to adjust the bid-ask spread in order to make a profit.

DD brokers are able to provide fixed spreads and guaranteed stop loss orders, which some traders may find more attractive than the variable spreads and potential slippage that can occur with an ECN or NDD broker.

However, this also means that the trader is not trading on the true market price and the broker has the ability to manipulate the price for their advantage.