Forex Brokers with No Dealing Desk (NDD)
When you start trading forex, you will learn about a few different types of brokers, one of the most popular being the NDD broker. No dealing desk (NDD) describes a trading platform offered by a forex broker that provides unfiltered access to interbank market rates of exchange. As the name rightly suggests, there is no interference between the forex trader placing the trades and the forex market. By working with banks and other major market players, NDD brokers are able to offer more competitive bid and ask prices to forex traders.
What is a NDD forex broker?
Forex traders that use NDD brokers will buy and sell based on current market prices. These prices are not determined by the broker. NDD brokers simply connect two trading parties without passing your orders through a dealing desk.
This means that they never take the other side of any trade so there should not be any conflict of interest. That is the main reason that the majority of traders would prefer to trade with an NDD forex broker rather than a market maker.
What is a DD forex broker?
In contrary to an NDD broker, dealing desk (DD) brokers create market prices for their clients. This means that they will often take the other side of your trade and it is therefore not always in their best interest that you are a successful trader.
DD brokers are also called market makers and will often try to match your trade with other clients. If there are no matching orders in the market, this is when they will take the opposite side of your position. You can see why this can lead to a conflict of interest and thus, an NDD broker is considered more favourable in most instances.
There may actually be some scenarios in which a trader would prefer using a market maker broker. For instance, if you had a forex trading strategy that required fixed spreads, then you would probably only get these conditions via a dealing desk broker. This is because they are the ones who are ultimately in charge of setting the bid/offer pricing for each currency pair and so they can control their own exposure to some extent.
There are two main types of NDD brokers. They are called Straight Through Processing (STP) or Electronic Communications Network (ECN). STP forex brokers provide direct access between traders and the banks and other liquidity providers which move the market. ECN forex brokers do all the same things which STP brokers do, except that they also allow their clients to trade directly with each other.
No dealing desk (NDD) vs dealing desk (DD) forex brokers
The main difference between NDD and DD brokers are that the spreads can vary greatly. From my experience, non-dealing desk forex brokers have the tightest spreads available as they get them direct from the market without any mark-ups. You will see NDD brokers with spreads from as low as 0.0 pips.
On the other hand, market maker or DD brokers can add a spread mark-up which can increase your overall trading costs. They can also have extra slippage as trades go through the dealing desk. This means you might not get your trades executed at the best possible prices as you can with an NDD broker.
DD brokers often take the opposite side of your trade. On the other hand, NDD brokers are simply a connecting bridge between client and liquidity provider. You have to think how you would feel about your broker seeing your order before it reaches the market and the vulnerability that leaves open.
With a DD broker, your trade orders are filled on a discretionary basis. This differs from an NDD broker, where you have automatic order execution with no re-quotes. You might not always get the price that you expect from either broker but NDD brokers tend to have the better pricing.
How do NDD forex brokers make money?
Non dealing desk forex brokers usually make a profit either by charging a small commission fee on each trade or by adding a small mark-up on the bid/ask spread. Even with these additional fees on added on top of your trades, NDD brokers can still work out cheaper in the long run as you are getting direct market access (DMA).
They should have minimal slippage which can occur when there is a dealing desk intervention between your trades and the market when using a dealing desk broker. This can make a big difference if you are using a trading strategy that relies on small price movements where every pip can make a big difference.
Another way that NDD forex brokers can make money is through your use of the trading platform itself and any other fees they charge for premium services. This can include data feeds, access to professional trading tools and dedicated support.
NDD forex broker pros & cons
- There is no dealing desk or other third-party interfering with your trades
- You can get your trades executed at the best prices on the market at all times
- NDD forex brokers can offer tighter spreads and lower commission fees
- It eliminates the possibility of price manipulation
- They are not always guaranteed to fill your order
- Might be hard to trade around low liuqidity market conditions
- They could have variable spreads that are higher during unstable periods
Who are the best NDD forex brokers?
There are hundreds of NDD brokers that you can trade forex with. The majority of them will offer a great selection of major, minor and exotic currency pairs. Below you can see a selection of our best non-dealing desk forex brokers.
ASIC, BaFin, CFTC, DFSA, FCA, FINMA, FMA, FSA, FSCA, JFSA, MAFF, MAS, METI, NFA
Conclusion: should I trade with an NDD forex broker?
In my opinion, yes. This is because when trading with an NDD broker you have access to real market prices with lower spreads. You also get a more reliable network and faster trade execution with NDD accounts as they do not need to go through an additional step in the process. Trading with an NDD broker can give you confidence that there will be no conflict of interest with your trades and the broker.
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