A no-dealing desk (NDD) broker is a type of forex broker that provides direct access to the interbank market without the intervention of a dealing desk. Unlike traditional brokers, no-dealing desk brokers do not act as intermediaries between the trader and the market. Instead, they act as a bridge, connecting traders to liquidity providers such as banks, hedge funds, and financial institutions.

In this article, we will explain how no-dealing desk brokers work, the advantages of trading with an NDD broker, and what to consider when choosing this type of broker.

How No-Dealing Desk Brokers Work

No-dealing desk brokers use electronic communication networks (ECN) or straight-through processing (STP) to execute trades. When you place a trade with an NDD broker, your order is sent directly to the market and matched with the best available price from liquidity providers.

Here’s how the process works in more detail:

• Liquidity Providers: No-dealing desk brokers aggregate prices from multiple liquidity providers, such as large banks and financial institutions. This ensures that you get access to the best possible bid and ask prices.
• No Intervention: Unlike a dealing desk broker, an NDD broker does not interfere with your trade. The broker does not take the other side of your trade, meaning there is no conflict of interest.
• Execution Speed: NDD brokers often provide faster execution speeds because orders are processed electronically and sent directly to the market without any manual intervention.

There are two main types of no-dealing desk brokers: ECN brokers and STP brokers.

• ECN Brokers: These brokers use electronic communication networks to match buy and sell orders directly in the interbank market. ECN brokers charge a commission for each trade but offer very tight spreads.
• STP Brokers: STP brokers send orders directly to liquidity providers without using a dealing desk. They typically make money by adding a small markup to the spread, rather than charging a commission.

Advantages of Trading with a No-Dealing Desk Broker

There are several benefits to using a no-dealing desk broker:

• Transparency: NDD brokers offer greater transparency in pricing because they provide direct access to the interbank market. You can see real market prices, and there is no manipulation or re-quoting.
• No Conflict of Interest: Since the broker does not take the opposite side of your trade, there is no conflict of interest. The broker simply facilitates the trade between you and the liquidity provider.
• Tighter Spreads: No-dealing desk brokers often offer tighter spreads than dealing desk brokers, especially on major currency pairs, because they aggregate prices from multiple liquidity providers.
• Faster Execution: With no manual intervention, trades are executed quickly, which is especially important for high-frequency traders and scalpers.
• Access to Real Market Prices: Because trades are executed directly with liquidity providers, you get access to real-time market prices, making it easier to manage your trades efficiently.

What to Consider When Choosing a No-Dealing Desk Broker

When selecting an NDD broker, there are a few factors to consider to ensure you make the best choice:

• Spreads and Commissions: NDD brokers can either charge commissions or add a markup to the spread. Compare the overall cost structure to ensure you are getting the best value.
• Regulation: Always choose a broker that is regulated by a recognised financial authority, such as the FCA (UK) or CFTC (US). Regulation ensures that the broker operates under strict guidelines and provides protection for your funds.
• Liquidity Providers: The quality and number of liquidity providers connected to the broker can affect pricing and execution. A broker with more liquidity providers will generally offer tighter spreads and better execution.
• Execution Speed: Fast execution is crucial, especially for traders using strategies that rely on precise entry and exit points. Ensure the broker offers reliable execution speeds.
• Account Types: Check the types of accounts offered by the broker. ECN and STP brokers may offer different account types with varying conditions, such as minimum deposits or leverage options.

Practical and Actionable Advice

Here are some tips to keep in mind when choosing a no-dealing desk broker:

• Test on a Demo Account: Before committing real money, try the broker’s platform with a demo account to test execution speed, spreads, and other features.
• Understand the Fee Structure: Make sure you know whether the broker charges commissions, marks up the spread, or both. Calculate the total cost of each trade to avoid surprises.
• Consider Your Trading Style: If you are a scalper or day trader, execution speed and low spreads are crucial. Make sure the broker can meet your specific needs.

To learn more about different types of brokers and how to make informed decisions in forex trading, consider enrolling in one of our Trading Courses at Traders MBA. These courses provide in-depth knowledge on broker types, trading strategies, and market analysis to help you succeed.

Frequently Asked Questions

What’s the difference between a no-dealing desk broker and a dealing desk broker?
A no-dealing desk broker sends trades directly to liquidity providers, while a dealing desk broker acts as the counterparty to your trades, often taking the opposite side.

Do NDD brokers offer better spreads?
NDD brokers generally offer tighter spreads because they aggregate prices from multiple liquidity providers. However, they may charge commissions on trades.

Can I scalp with a no-dealing desk broker?
Yes, NDD brokers are ideal for scalpers because they offer faster execution speeds and tighter spreads, which are important for high-frequency trading strategies.

What is an ECN broker?
An ECN broker uses an electronic communication network to match buy and sell orders directly in the interbank market. ECN brokers typically charge commissions but offer very tight spreads.

Is a no-dealing desk broker safer than a dealing desk broker?
Both types of brokers can be safe as long as they are regulated. The key difference is in how trades are executed, with NDD brokers providing direct market access without intervention.

Do NDD brokers have re-quotes?
No, NDD brokers do not re-quote prices because trades are executed directly with liquidity providers in real-time.

What is the main advantage of using an NDD broker?
The main advantage of using an NDD broker is transparency in pricing and faster execution, as trades are not subject to intervention by the broker.

Can NDD brokers manipulate prices?
No, NDD brokers do not manipulate prices because they provide direct access to real market prices from liquidity providers.

How do NDD brokers make money?
NDD brokers make money either by charging a commission on trades or by adding a small markup to the spread.

Where can I learn more about no-dealing desk brokers?
For more information on NDD brokers and forex trading strategies, our Trading Courses at Traders MBA provide the knowledge you need to make informed decisions and improve your trading skills.

Conclusion

A no-dealing desk broker offers traders direct access to the forex market by connecting them to liquidity providers without any interference. This type of broker provides faster execution, tighter spreads, and greater transparency, making it ideal for traders who want to avoid conflicts of interest and benefit from real market prices.

If you’re looking to deepen your understanding of forex trading and the types of brokers available, consider enrolling in our Trading Courses at Traders MBA. These courses provide valuable insights and strategies to help you navigate the forex market with confidence.