Retail forex brokers can manage the risk on the other side of your trades in one of three ways, and each method has its pros and cons. We explained them in greater detail in this earlier discussion: Who is the counterparty in an exchange?
Full disclosure: FOREX.com is market maker, but that’s not why we defend this trade execution model. (In fact, for high volume traders [100K minimum trade size] we offer Direct Market Access [DMA].) Rather, we are a market maker for most of our retail clients, because we believe market making is the best way to provide them with reliable pricing on smaller trade sizes while effectively managing our own risk. We are fully accountable for every execution and don’t outsource that responsibility to a third party.