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Key Takeaways
- Market Makers act as your counterparty. They "make the market" by quoting their own bid/ask prices, which means they profit when you lose.
- STP (Straight Through Processing) brokers pass your orders directly to liquidity providers without a dealing desk, but they may add a markup to the spread.
- ECN (Electronic Communication Network) brokers connect you directly to a pool of liquidity providers, offering the tightest raw spreads with a commission per trade.
- For Scalpers: ECN brokers like IC Markets or Pepperstone are essential due to their ultra-tight spreads and fast execution.
- For Beginners: STP brokers are often simpler, with fixed or variable spreads and no commission structure to worry about.
Table of Contents
What is a Market Maker Broker?
A Market Maker, also known as a Dealing Desk (DD) broker, is a brokerage that creates its own market for clients. When you place a trade, the Market Maker takes the opposite side of your position. If you buy EUR/USD, they sell it to you. This creates an inherent conflict of interest: when you lose money, they profit directly.
Conflict of Interest: Because Market Makers profit from client losses, there have been historical allegations of "stop hunting" and price manipulation. However, reputable regulated Market Makers like Plus500 are bound by strict regulatory oversight, which limits this risk significantly.
Pros of Market Makers
- Fixed Spreads: Many Market Makers offer fixed spreads, which are predictable and don't widen during volatile news events.
- Lower Minimum Deposits: Often more beginner-friendly with accounts starting from $10-$50.
- Guaranteed Execution: No requotes in most cases since the broker is always the counterparty.
Cons of Market Makers
- Conflict of Interest: Profiting from your losses creates potential issues.
- Wider Spreads: Fixed spreads are often 1-2 pips higher than ECN raw spreads.
- Restrictions: Some strategies like scalping or hedging may be restricted.
What is an STP Broker?
STP stands for Straight Through Processing. These brokers route your orders directly to their liquidity providers (banks, hedge funds, other brokers) without any dealing desk intervention. There is no trader on the other side taking the opposite position; your order is simply passed through.
STP brokers typically make money by adding a small markup to the spread they receive from liquidity providers. For example, if the LP quotes EUR/USD at 0.2 pips, the STP broker might offer it to you at 0.8 pips, pocketing the 0.6 pip difference.
Pros of STP Brokers
- No Conflict of Interest: The broker profits from your trading volume, not your losses.
- Better Pricing: Spreads are generally tighter than pure Market Makers.
- Simple Pricing: All-inclusive spreads with no separate commission (in most cases).
Cons of STP Brokers
- Variable Spreads: Spreads can widen significantly during news events or low liquidity periods.
- Slippage: During fast markets, your order may be filled at a different price than requested.
Many brokers in our Best STP Brokers list, such as XM and Exness, operate on this model.
What is an ECN Broker?
ECN stands for Electronic Communication Network. An ECN broker provides a marketplace where multiple liquidity providers—banks, market makers, and other traders—compete to offer you the best bid and ask prices. This results in the tightest possible spreads, often starting from 0.0 pips on major pairs.
How ECN Brokers Make Money: Since they offer raw spreads with no markup, ECN brokers charge a commission per lot traded (e.g., $3-$7 per round turn on a standard lot). This transparent model aligns their interests with yours—they want you to trade more, not lose more.
Pros of ECN Brokers
- Tightest Spreads: Raw interbank spreads, often 0.0-0.3 pips on EUR/USD.
- No Conflict of Interest: Brokers earn from commissions, not your losses.
- Best for Scalping: Low spreads and fast execution are critical for scalping strategies.
- Depth of Market (DOM): Some ECN platforms show you the order book, revealing where liquidity sits.
Cons of ECN Brokers
- Commission Costs: You pay a fee on top of the spread, which can add up for high-frequency traders.
- Higher Minimum Deposits: True ECN accounts often require $200-$1,000+ to open.
- Variable Spreads: While usually tight, spreads can spike during illiquid periods.
Top ECN brokers include IC Markets, Pepperstone, and FP Markets. See our full list on the Best ECN Brokers page.
ECN vs STP vs Market Maker: Comparison Table
| Feature | Market Maker | STP | ECN |
|---|---|---|---|
| Spread Type | Fixed (Higher) | Variable (Marked Up) | Raw (0.0 pips possible) |
| Commission | None (built into spread) | None (usually) | Yes ($3-$7/lot) |
| Conflict of Interest | Yes (counterparty) | No | No |
| Best For | Beginners, News Traders | Swing Traders | Scalpers, Day Traders |
| Execution Speed | Fast (guaranteed) | Fast | Fastest |
| Min Deposit | $10-$200 | $50-$500 | $200-$1,000+ |
Which Broker Type is Best for You?
Best for Beginners
If you are just starting out, a well-regulated Market Maker or STP broker is often the easiest choice. They offer simpler pricing (no separate commission), lower deposits, and educational resources. Check our Best Brokers for Beginners guide.
Best for Scalpers & Day Traders
If you trade frequently and target small price movements, an ECN broker is essential. The raw spreads minimize your entry cost, and fast execution ensures you get filled at your desired price. Our Best Scalping Brokers page lists top options.
Best for Swing & Position Traders
For traders holding positions for days or weeks, spreads matter less than swap rates and reliability. An STP or even a quality Market Maker works fine. Focus on regulation and risk management instead of shaving 0.2 pips off a trade you'll hold for a week.
What About Hybrid Brokers?
Many modern brokers operate a hybrid model, combining elements of STP and ECN execution. For example, a broker might offer a "Standard Account" with marked-up spreads (STP model) and a "Raw Account" with interbank spreads plus commission (ECN model).
Brokers like Exness, Pepperstone, and IC Markets offer both account types, allowing you to choose based on your trading style.
Pro Tip: If you trade more than 5 lots per month, the ECN/Raw account is almost always cheaper despite the commission. Do the math for your specific volume.
Frequently Asked Questions
What is the difference between ECN and STP brokers?
ECN brokers connect you to an electronic network of liquidity providers and charge a commission on raw spreads. STP brokers pass orders to LPs but typically mark up the spread instead of charging commission. ECN usually offers tighter spreads; STP offers simpler pricing.
Do ECN brokers trade against you?
No. True ECN brokers are not the counterparty to your trade. Your orders are matched with other market participants (banks, funds, other traders). The broker earns from commission, so they benefit when you trade more, not when you lose.
Is ECN better for scalping?
Yes. ECN brokers offer the tightest spreads (often 0.0 pips) and fastest execution, which are critical for scalping where every pip counts. They also allow high-frequency trading without restrictions. Check our Best ECN Brokers for Scalping guide.
What is a true ECN broker?
A "true" ECN broker provides direct access to the interbank market with no dealing desk intervention. They display Depth of Market (DOM)—the order book showing available liquidity at different price levels. Not all brokers claiming to be ECN actually provide DOM.
Do Market Makers always trade against clients?
Technically, yes—they are the counterparty. However, reputable regulated Market Makers hedge their risk with LPs, so they are not directly "betting against you." They profit primarily from the spread, not your losses. Regulation is key.
Which broker type has the lowest spreads?
ECN brokers offer the lowest raw spreads (0.0-0.3 pips on EUR/USD). However, you pay a commission on top. STP brokers have slightly higher spreads (0.6-1.2 pips) but no commission. Market Makers typically have the widest spreads (1.0-2.0 pips).
What is a No Dealing Desk (NDD) broker?
NDD is an umbrella term covering both STP and ECN brokers. It simply means there is no dealing desk intervening in your trades—orders go directly to liquidity providers. Both STP and ECN are types of NDD execution.
Are ECN brokers regulated?
Yes, top ECN brokers are regulated by authorities like FCA (UK), ASIC (Australia), and CySEC (Cyprus). Always verify a broker's license before depositing. See our guide on forex regulations.
What is the minimum deposit for ECN accounts?
ECN account minimums range from $200 to $1,000+ depending on the broker. Some brokers like IC Markets offer ECN (Raw Spread) accounts with just $200. For smaller deposits, consider a Standard (STP) account first.
Can beginners use ECN brokers?
Yes, but STP or Standard accounts are often simpler for beginners. The all-in spread pricing avoids confusion about separate commissions. Once you understand trading costs, upgrade to an ECN account for better execution.
What is slippage in forex?
Slippage is when your order is executed at a different price than requested. It happens during fast-moving markets or illiquid conditions. ECN and STP brokers experience slippage; Market Makers often guarantee fills but at wider spreads.
Is STP execution better than Market Maker?
STP removes the conflict of interest that exists with Market Makers. However, a well-regulated Market Maker can still be trustworthy. The key is regulation—an FCA-regulated Market Maker is safer than an unregulated STP broker. See our Investopedia guide on choosing brokers.
