Broker to Trading

The brokers above are No Dealing Desk (NDD) brokers, and are either Australian or have a base in Australia as well as elsewhere in the world. All of them are regulated by the Australian Securities and Investments Commission (ASIC). The types of NDD (i.e. the way brokers may typically describe themselves) are Straight Through Processing (STP), Electronic Communication Network (ECN) and Direct Market Access (DMA).

STP versus ECN versus DMA

These three types are typically no dealing desk formats, which is to say that the broker uses technology to match orders rather than acting as a market maker. In effect the broker bypasses the dealing desk using STP order routing technology to match orders from the network of liquidity providers (the broker's ECN) to the trader (if they are no dealing desk). These liquidity providers can include specialised liquidity providers, banks, institutions and dark pools.

What is STP, ECN or DMA can vary to an extent, and STP and even DMA can be sometimes categorised as simply ECN (though the idea of DMA is to bring the trader directly into the order books, via the broker). STP actually refers to the electronic algorithm which allows the broker to act as a middleman between the client and the liquidity provider, without actually acting as a market maker, so ECN accounts are also STP. The broker acts as a 'broker' and matches orders, taking the spread and the commission charge, if there is one.

The more 'ECN' a broker is, the more it may be concerned with providing high speed order execution, and thus may make use of Equinix data centers, or other ways to co-locate their trading servers with liquidity providers. In an Equinix data center, the servers of the broker are in physical proximity with other market participants (like liquidity providers). Optical fiber technology allied with physical proximity and other technology helps route orders very rapidly, a latency (delay) which can be down to the order of miliseconds. Allied with no dealing desk intervention, this kind of speed can be sought by traders who use automated trading strategies, which rely on speed on accuracy. Traders who do not use robots may still appreciate rapid order processing.

ECN Spreads

Typically an ECN spread is low relative to a dealing desk spread, and comes with an additional charge (the commission). While the commission is typically fixed (but may vary with volume), the spread is not and can vary, but will tend to stay low. The commission charge is taken automatically as the order is placed.

For the most liquid Forex pairs this can result in a spread from 0, but this does not mean that the trade costs nothing to make, as there is still a commission charge. Also, this is a minimum variable spread and the spread can be higher than this.

ECN and trading

ECN prices (the spread plus the commission charge) may not actually be cheaper than dealing desk prices, especially compared with brokers which provide low variable spreads without a commission charge, but because there is no dealing desk intervention, there are typically no requotes and less or no restrictions on trading styles.

Thus scalping and types of trading automation and news trading can be possible, where they may not be in a dealing desk broker (because orders may be rejected or because the trading style is not allowed).

Trading platform

All of the brokers offer MT4 and some may provide MT5 and cTrader. These platforms support both automated trading with robots and non-automated trading. These platforms have a wider support base where the trader can find information and tools to assist them when trading.