February 28, 2024

Getting to know mister dealing desk forex broker, the market maker

In Forex trading, we often hear the terms broker or market maker. They are the middlemen that stand in place of the buyer and the seller. In case you did not know, forex brokers have more than one type. We have dealing desks (DD) and no dealing desks (NDD) brokers. In this article, you will meet and get to know the first one, Mr. Dealing Desk Forex Broker.

Getting to know Mr. Dealing desk broker

A dealing desk broker earns money through spreads and giving clients liquidity. He is also known as a market maker. And when we say market maker, he will literally make the market for his clients as he takes the other client’s trading side. Upon reading this fact, we may infer that there may be a conflict of interest issue. We beg to disagree with that because these forex brokers provide sell and buy quotes. They also fill both the buy and sell order for their clients. The actions and decisions of traders do not affect them. They are indifferent towards them.

Tell me more about Mr. Dealing desk broker.

Desk dealing forex brokers are the only ones who have access to interbank’s rates. However, if you have doubts about the rates, know that the competition between one DD forex broker to another is very tough, making the rates the same or at least close to the interbank’s.

Market makers can control the prices at which the orders get filled. So, it means that there is only a very minimal risk for fixed prices.

How does trading with dealing desk brokers work?

Let us say that Sonny wants to buy 50,000 units of EUR/ USD, so he placed a buy order with his dealing desk broker. The broker will try to look for a sell order from his clients that match Sonny’s so that the order gets filled. He can also look for a liquidity provider where he can pass this buy order. A liquidity provider may be a bank or any other institution that buys or sells assets.

The dealing desk forex broker does this because he wants to minimize the risks as he simultaneously earns money when he does not take Sonny’s side of the trade but the other client’s. If the forex broker did not find any match for Sonny’s buy order, he would have to take the trading side of Sonny. However, the risk management policy of one dealing desk broker may be different from another forex broker, so you should double-check that.

To cap it off

If a dealing desk forex broker is also called the market maker, know that there is one more type of forex broker called “no dealing desk,” known as bridge makers. They are more of bridge makers than market makers as they do not take the other side of the client’s trade but connect both of the parties involved. The client orders of a dealing desk broker do not pass through a dealing desk; hence its given name.