What is a dealing desk forex broker?

A dealing desk broker, also known as a market maker, is a type of forex broker that acts as the counterparty to trades, rather than providing a platform for traders to buy and sell financial instruments directly with each other. This means that the broker takes the other side of the trade themselves, and holds positions in the market.

Market makers make their money by adding a markup to the spreads they offer to traders, and by earning the difference between the bid and ask prices on each trade. They may also offer additional services such as educational resources and trading tools to their clients.

In contrast, non-dealing desk brokers, such as ECN (Electronic Communications Network) brokers and STP (Straight Through Processing) brokers, do not act as the counterparty to trades and do not hold positions in the market. Instead, they provide a platform for traders to buy and sell financial instruments directly with each other, or they route trades through a liquidity provider or a network of liquidity providers.

Here is a list of some non-dealing desk (NDD) brokers that are based in the United Kingdom:

  • City Index
  • IG Group
  • Saxo Bank
  • CMC Markets
  • Admiral Markets
  • Forex.com
  • OANDA
  • Interactive Brokers
  • Plus500
  • eToro

Bucket Shops

Market makers are sometimes referred to as “bucket shops” because they were historically known for accepting trades from retail customers and then “bucketing” them, or placing them into a common pool rather than executing them on the open market.

This practice allowed market makers to profit from the spread between the bid and ask prices, rather than actually executing trades on behalf of their clients. This gave rise to the term “bucket shop,” as these brokers were essentially “dumping” their clients’ trades into a common bucket rather than executing them on the open market.

Today, most market makers have moved away from this practice and are subject to regulatory oversight, which requires them to execute trades at fair prices and to disclose any conflicts of interest. However, the term “bucket shop” is still sometimes used to refer to market makers that engage in unethical or deceptive practices.