Most retail traders in the forex market will be working with the class of brokers that are known as dealing desk brokers or market makers. These types of brokers are named market makers because they “make the market” for the retail traders. Trading Forex at the interbank market requires a lot of liquidity. Retail Traders do not have access to the kind of funding that will generate such a liquidity pool.
This is where the market makers, like us come in. They form a bridge between the interbank market and the retail forex traders. They do this by buying up large positions from the liquidity providers, which they sell to the retail clients in package sizes that can be accommodated by their small accounts.
Thus, the broker creates a new market aside from the parent market, that can fit the trader’s liquidity positions. Essentially, we are taking the other side of the trade. The process just described is all done in the broker’s dealing desk department. This is why this class of brokers is known as the dealing desk brokers. The execution of the traders’ orders occurs in-house.
There are many benefits to this type of set-up. These include:
- In-house order execution
- Fixed spreads
- Potential for fast executions if the broker offers low latency servers
- No commissions on trades
- Single price quotations
- Lower entry barrier