DMA/STP Model or Market Maker Forex Broker?

When trading Forex, there are two main broker models, DMA (which stands for Direct Market Access) and the Market Maker.

DMA Brokers use a direct to market execution strategy, where all trades are passed on instantly, automatically and quickly to forex banks that provide market liquidity. The Forex Brokers using this model are known as DMA, STO or ECN brokers. All of these broker types ensure a no conflict of interest execution policy and protect your profitable forex strategy or Robot as best as possible.

The other model is the Market Making Brokers. These brokers run dealing desks and in essence fill orders internally and do not send orders to the forex banks or liquidity providers, but instead acting as the counterparty taking the opposite side to your Forex orders. This is widely considered to cause an immediate conflict between client and broker as the broker makes profits when you lose.

Also, Market Makers generally do not offer the ideal trading conditions for profitable traders, Forex Robots and Quants to trade with as naturally, these are the categories that cost a dealing desk broker money.

How Broker Models actually work?

DMA/STP only Agencies – acting as the middle man between the end client (the trader) and the market (stock exchanges, banks, ECNs and other institutions involved in orders filling)

Market Making Brokers – operating a ‘Risk Book’ and executing clients’ orders on a virtual market by taking the opposite position.  The fully control the market conditions, pricing and execution quality/delays at their own discretion.

Why Trade Forex with Inter-Bank Markets?

The 100% DMA/STP broker receives actual real market pricing that is not manipulated in any way. This allows clients to trade on the real market conditions at core inter-banking spreads. For buying/selling currencies, clients use a currency network trading is available at the best possible price.

DMA/STP/ECN Broker Licences & Regulations

A true 100% DMA/STP broker is licensed in the reception and transmission of financial instruments and is not licenced to deal as a principal. By checking the licence of the Broker, you will clearly see what type of Forex broker model they are running.

Market Making Model- How does it work?

A 100% Market Maker is holding the so called risk book and is taking risk on its clients orders. By executing orders internally, the broker is taking full responsibility for pricing instruments and filling the orders, but also taking the risk of losing significant amounts of money if the investor generates profits through trading. Of course, investors that trade with more risky strategies tend to lose more and are ideal for market making brokers. Of course a market maker wants to keep these secrets as private and as hidden as possible from potential investors. Usually, these brokerage companies do not charge commissions, offer virtual “fixed spreads” and virtual bonus schemes to incentivise new and existing traders to trade.

Learn more about true Direct to market order execution and benefits: http://www.yadix.com/about-us/stp-forex-model/