Market Makers vs ECN's

[dny5k]

The lesson doe not really maker it clear. Could someone please help me fully understand the difference?

[flamingoproxy]

it’s very, very widely misunderstood

the reality is that it actually signifies very, very little

spot forex “brokers” often claim to be “STP brokers” to encourage their customers to believe that their “broker” doesn’t hold the other side of their trade, but passes it on to a “liquidity provider”, but there’s often no way of knowing whether the brokerage actually owns the “LP” as well, so it sometimes signifies nothing, really

the recent post linked to just below, and the 5 or 6 posts following it, ought to tell you what you actually need to know, i think:-

Text correction: dealing desk or non-dealing desk?

no there’s no such thing, really, as a “desk that’s non-dealing” the expression “non-dealing desk broker” just means a broker that doesn’t use a dealing desk “without the intervention of a dealing desk” is correct - it just means, as explained above, that trades are (allegedly) passed on to a liquidity provider without being individually inspected by a broker-employed “dealer” which would cause delays note, though, that there’s no reliable way of telling whether a broker is “NDD” just becau…

[dny5k]

Thank you for your response but this is not my question. I mean to ask what the difference between a retail marjet maker and a retail ecn

[flamingoproxy]

@dny5k

I mean to ask what the difference between a retail marjet maker and a retail ecn

i understand

sorry my response was unhelpful

what i’m trying to explain (very tactfully and i hope now more helpfully!) is that your question is actually based on a mistaken premise, i.e. you are assuming (as many people do) that they’re two different things

the reality is that they are often not, or at least that it isn’t possible for a retail trader reliably to distinguish between them in any ways other than how and by whom they’re regulated

“ecn” stands for “electronic communications network” and all forex brokers have an electronic communications network, if they’re operating online, whether they are market makers or not, so the term doesn’t actually mean anything real at all

(just like the terms “ndd” and “stp”)

in practice, some brokers (often the not-well-regulated ones) make a big deal out of claiming that they’re “ecn brokers” rather than “market makers”, in the hope and expectation that their customers will thereby assume that the broker doesn’t hold the other side of their trade, i.e isn’t their counterparty, i.e. isn’t wanting them to lose because all trades are passed directly to a liquidity provider

sometimes they are, sometimes they aren’t, sometimes the broker owns the LP anyway so it makes no difference

so in reality this often isn’t the case, even when they claim it is

some are truly ecn, others aren’t - you can’t tell which from their claiming to be “ecn” because the term doesn’t really mean anything and is designed to fool you

what you CAN (and should) do is use only a broker regulated as described in the posts linked to above

doing that DOES give you some protection, because the properly regulated ones aren’t allowed to deceive people and their websites are checked regularly by their regulators

the bottom line: don’t let anyone fool you into believing that a broker claiming to be an “ecn broker” isn’t financially involved in the outcome of your trade, whereas a market maker is: that’s wrong (but VERY widely believed by over-optimistic retail traders who have been fooled by the terminology!)

[Trendswithbenefits]

@dny5k

Thank you for your response but this is not my question. I mean to ask what the difference between a retail marjet maker and a retail ecn

@dny5k ALL the major Retail FX (CFD) Brokers are Market Makers… They take the other side of your trade up to a point… (Lot Size - Risk)

An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market. ECN trading is especially helpful when investors in different geographic areas wish to complete a secure transaction without the use of a third party.

This is now pretty much provided by all Brokers, so it does not distinguish one Broker from another…

In summary… ECN used to mean faster market access… Now it’s just a marketing gimmick.

[SmallPaul]

@dny5k

Thank you for your response but this is not my question. I mean to ask what the difference between a retail marjet maker and a retail ecn

To get a better understand you should read this

What is the Difference Between ECN and Market Maker?

[tommor]

The industry likes us to believe that we are all buying and selling currency. In fact some brokers explicitly say things like forex trading comprises buying one currency while simultaneously selling another. This is technically true, but that won’t be happening with an account they offer.

They like to give the impression we are acquiring some assets or products which have an inherent value.

The terms CFD and spread-bet of course give the game away

[Jenirogan]

Market makers provide liquidity by buying and selling securities at quoted prices, while ECNs directly connect buyers and sellers to execute trades at the best available prices.

[flamingoproxy]

@Jenirogan

Market makers provide liquidity by buying and selling securities at quoted prices, while ECNs directly connect buyers and sellers to execute trades …

that’s certainly what they’d like you to believe, anyway

[SmallPaul]

@tommor

The industry likes us to believe that we are all buying and selling currency.

Exactly, this is how different financial markets work, you don’t own the asset you are buying and selling, you speculate on the price going up or down.