ECN, STP and Market Maker Brokers Explained
How forex brokers execute your orders, where conflicts of interest arise and what regulation requires.
Brokers describe their execution with labels like ECN, STP, DMA and market maker. These labels are not regulated terms, so it pays to understand what sits behind them.
Market maker (dealing desk)
The broker is the counterparty to your trade and quotes its own prices. It may hedge client exposure externally or internalise it. Market making is legitimate and regulated, but creates a potential conflict of interest because client losses can be broker revenue. Regulators require order-execution policies, conflict-of-interest management and best-execution reporting.
STP (straight-through processing)
Orders are passed to one or more liquidity providers, with the broker earning a mark-up on the spread. In practice many "STP" brokers run a hybrid model, internalising some flow.
ECN / raw spread
Orders interact with an aggregated order book of liquidity providers; spreads are raw and the broker charges a commission. True multilateral ECNs are rare in retail FX; "ECN account" usually means raw pricing plus commission.
What matters more than the label
- The regulator and its best-execution rules
- Published execution statistics (fill rates, slippage symmetry)
- Total cost: spread plus commission plus swaps
- Whether positive slippage is passed on to you