In every financial market, in order for the retail investor to enter into transactions, intermediary’s help in these operations is required. In the foreign exchange market, these are Forex brokers. It is these institutions that provide us with access to appropriate technology, liquidity and, above all, to the leverage mechanism. To start trading it is required to open an investment account – this involves completing the registration form, accepting or signing the contract, sending documents and crediting the account with funds. Take a look at short reviews of forex brokers.
Market Maker
Market Maker was probably the most popular market model. Its popularity resulted from the relatively low costs of creating such activity, as well as the simplicity of operation. In the MM model we are dealing with the simulation of the real market, where the investor, opening the position on the platform, concludes a transaction with a broker who acts as a market maker. The broker then independently secures these transactions on the interbank market on its own behalf. Thanks to the fact that we do not deal directly with trading directly on the market, we can receive much higher leverage (1: 500 and more), trade with a low minimum deposit as well as access to a very small transaction volume (microlights, nanolots).
Market Maker Non-Dealing Desk
The Market Maker Non-Dealing Desk Model (MM NDD) is a derivative of the classic Market Maker model. The difference is the lack of dealer’s intervention in the execution of orders, which may recycle, delay or reject our transactions. Thanks to this, the execution of orders is immediate and the phenomenon of re-quotes does not occur, although the broker is the other side of the client’s transaction all the time.
Straight Trough Processing
The Straight Trough Processing (STP) model assumes that the broker is only the intermediary of our transactions, which anonymously transfers orders to liquidity providers with whom it cooperates, but does not collect all offers in one place. The STP broker is not a party to the transaction, so we avoid a possible conflict of interest. Thus, it is able to provide attractive transaction costs and a relatively high leverage. His remuneration is included in the spread or is added in the form of commissions on the value of the transaction.
Electronic Communication Network
Companies operating in the Electronic Communication Network (ECN) model are among the most sought after by investors. Like STP, ECN brokers are only intermediaries in transactions, but unlike them, they try to centralize the Forex market, gathering as many liquidity providers as possible in one place. Thanks to this treatment, they offer their clients the best possible price at a given moment and offer very low spreads. An additional advantage is the ability to place your offer in the order book, thanks to which we ourselves become liquidity providers and eliminate the risk of slippage occurring at orders with immediate execution.
Multilateral Trading Facility
Multilateral Trading Facility (MTF) from English translates literally means “multilateral trading platform”. In other words, it is a stock exchange model of execution of orders on the Forex market. It is extremely rare. Its idea is total transparency in trade and ensuring orderly trading. The MTF broker offers its clients access to a worksheet containing only binding bids with a limit.
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