Difference Between Deal Desk Brokers and ECN or Other (Currenex)

19/10/07 21:15
Deal Desk Brokers

Are non-interbank third party liquidity providers who accommodate low minimum account sizes allowing small investors to participate in the foreign exchange market.
  • You trade on a bid/ask spread and dealer holds your orders that may be in a manner that is computerized, or not.
  • Internally, the DD’s can see orders within their firm line up, while a separate entity can control fills and price within reason
  • You pay the spread and the broker holds a position against you betting most traders will lose.
  • Odds of this increase with price control
  • It is a conflict of interest, but they are legally permitted to do it within reason.
  • Some DD's will take the liberty to capitalize on it while others will be more honest
  • A DD may be a good place to familiarize yourself with the market before taking on other options.
  • However, there is an ECN that accepts small accounts > seaviewventures.efxgroup.com
  • ECN

  • Computer systems that facilitate trading of financial instruments outside of exchanges/banks
  • By eliminating the Deal Desk (broker), who can legally filter the liquidity to their advantage, the ECN allows for greater price transparency and a direct access to liquidity provider
  • Bid/Ask spread must move with market demand
  • Must charge a fee, which is usually very reasonable (i.e. $10 per million traded)
  • The more banks in the liquidity pool of the ECN the better
  • There should be no limitations on volume and time of day (unlike event restrictions we see enforced by the DD’s)
  • ECN are required to move your orders to a legitimate (not 3rd party FCM) interbank liquidity provider when price is available
  • Your order will become transparent to the market, instead of being held to serve the interest of your business.
  • ECN’s are FIX compliant
  • ECN Spreads are substantially tighter than DD's

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