What are the different types of Brokers?
There are 2 main types of Brokers: Dealing Desk (DD) otherwise known as Brokers « market maker », and No Dealing Desk (NDD).
What is a Dealing Desk Broker?
A « market maker » or « dealing desk » broker is a broker who has his own « exchange office ». Instead of hedging your positions on the market (via the interbank market), the Broker will take care of your transactions and decide how to handle them. He therefore plays the role of the market himself.
The Dealing Desk has a « risk book » in which it establishes a strategy to cover its risks which will depend on several factors, in particular based on its clients:
The Broker will therefore be able to adapt his strategy according to your level of trading (by observing your results), the volume you trade or the markets on which you trade.
The Broker will therefore often take a position contrary to yours in order to become your counterpart. He is the intermediary between you and the liquidity provider (the bank).
There may therefore be a conflict of interest: a winning trader will prove to be a source of losses for the Broker while a losing trader will be a source of income.
There may therefore be a conflict of interest: a winning trader will prove to be a source of losses for the Broker while a losing trader will be a source of income.
Market makers are the most widespread brokers on the market because they are simpler to set up and take advantage of the growing attraction of trading for individuals. Welcome bonuses are common and fixed spreads are used.
What is a No Dealing Desk Broker?
A Broker No Dealing Desk will faithfully place orders imposed on it by traders through the interbank market. They buy and sell in real time, according to their trader’s choice, through one or more banks they work with. This solution is therefore more transparent and the Broker is remunerated solely on spreads and commissions.
We can note that there are two types of No Dealing Desk :
- STPs (Straight Through Processing), also known as « pure brokers », which place orders through banks and are remunerated by the spread. Their spreads are therefore always variable.
- ECNs (Electronic Communications Network) which aggregate the different positions requested at time t (between banks, market makers and traders) to get the best possible spread. Their spreads are therefore always variable.
Advantage of a Broker No Dealing Desk :
These brokers play « transparency », the quotes are accurate, the spreads are low and there is no conflict of interest.
Disadvantage of a Broker No Dealing Desk :
Their role as intermediaries can sometimes cause « slippage » when you place orders. This is because there is a period of inertia when your order is executed.
Gravity Market, a No Dealing Desk Broker
Gravity Market is an STP Broker No Dealing Desk, which allows you to access the market efficiently and quickly with a zero raw spread, i.e. the market spread at no extra cost. Gravity Market’s income comes solely from commissions earned on trades made at Gravity Market (commission table available here ).
The « Slippage » of orders is also a strong point for Gravity Market because we provide our clients with FORTEX, a platform (PC, Mac and Mobile) directly linked to the market that allows them to place orders in less than 5ms.
It is for these reasons that our clients, partners and reputable financial institutions work with Gravity Market.