Broker to Trading

A trader can place orders with a broker which acts as market maker setting the spreads for Forex pairs for their pool of traders via the dealing desk. However brokers use liquidity providers. A non dealing desk broker uses technology to match orders for their clients from a pool of liquidity. This isn't exactly cutting out the middle person, as the order is made though the broker, who typically adds on a commission charge to the spread.

The Forex market is decentralised, but there are major players in it who set baseline spreads because they trade very large volumes (i.e. banks). These kinds of spreads are potentially available to the trader in the form of very low variable spreads for the most liquid Forex pairs, sometimes as low as zero. Hence at a no dealing desk broker very low spreads may be seen for pairs such as EUR/USD, GBP/USD and other major pairs.

However the addition of the commission charge increases the cost, as the cost includes the spread plus the commission charge. Additionally, these spreads are typically variable, thus a minimum spread of zero can be higher depending on a number of factors. The most liquid pairs may also have very low average spreads.

This is termed non or no dealing desk trading as the trader is trading via an electronic algorithm rather than with a dealing desk, though the broker may have a dealing desk. As well as liquidity, non dealing desk trading may include infrastructure to support high speed order processing, for example co-locating the broker's servers with the servers of liquidity providers at data centers. Some brokers are purely white label and may not have a dealing desk at all, and simply use third party infrastructure.

Because the broker's dealing desk either does not exist or does not intervene, then styles which a dealing desk broker may not support may be available to the trader. This can include automated trading as well as styles used by discretionary traders such as scalping and news trading at the time of release.