DD and NDD Types of Forex Broker

Forex broker is a part that can be an institution, agent or individual where it stands to meet the seller and buyer party. It is for sure that the product that they sell is Forex / foreign exchange or we can say it as international currency. Broker in Forex trading can be divided into some different types. If you wanted to choose the right brokers, you have to understand about each broker and its function.

Below is the explanation that we will share about the various types of brokers in Forex trading?

1. DD / NDD Broker

Commonly, there are two main kinds of broker in Forex; the Dealing Desk (DD) and No Dealing Desk (NDD) broker. Sometimes, the DD broker is also called the market maker broker, meanwhile the NDD broker can be divided into some brokers such as the STP or Straight to Processing broker and the combination between STP and ECN or Electronic Communication Network.

DD Broker gets the profits from spread. We can say that this kind of broker creates a market and their own exchange value for the clients. Maybe you will thing a manipulation here in this system, but it was not. Market maker is still providing the sell and buys and they don’t care about which one that will be chosen by trader.

What makes this broker good is that usually they offer great facilities such as high leverage up to 1:1000, free of interest, small spread (sometimes it’s even fixed spread), interesting bonuses, up to the possibility of deposite and easy withdrawal through the third party. The lack of this broker is that this broker has a market maker. It means trader is not seeing the real rate foreign currency that is happened in the interbank market. Besides that, usually they are also taking an opposite position with the traders.

The example is that if you open the buy position of EUR/USD for 1 standard lot. To fulfill that order first DD broker will try to find the order sell in pair and with the same size from the other trader. By doing that way, they decrease the risk possibility. However, if there was not match order, so they will open the opposite position with you. Every forex broker may have the different risk management. It means that although you now that a broker is DD type, it is better to ask them whether they do it or not.

Meanwhile NDD Broker literally means “without passing through the dealing table”. This broker is a true bridge between trader and interbank market. Spread in NDD broker cannot be fixed because it is based on the market price and usually it is bigger than the DD spread. Furthermore, usually NDD broker is not fighting back the trader position. Besides those forex broker types, there is also other type. It is the hybrid type which is the combination between DD and NDD forex broker.