ECN, STP and Market Maker: What Your Broker Is
Your broker's execution model determines who is actually on the other side of your trade.
Every trade has someone on the other side. Which someone depends entirely on your broker's execution model, and that choice affects your costs, your fills, and what happens when you are profitable.
This is not about finding the broker with the best bonus. It is about matching the execution structure to how you actually trade.
Market maker
A market maker, or dealing desk broker, takes the other side of your order. It quotes both a bid and an ask and profits from the spread, and from the residual when client positions lose.
The advantages are reliable liquidity, fixed spreads, and fills even in odd conditions. The structural concern is a conflict of interest: the broker profits directly when you lose. Reputable dealing desk brokers manage this with hedging, but the incentive exists.
ECN and STP
An ECN or STP broker routes your order to external liquidity providers — banks, funds, other participants. The broker earns a commission or a markup rather than trading against you.
The advantage is alignment: the broker wants you to trade more, not to lose. The trade-off is variable spreads that widen in thin conditions, plus per-lot commission. At larger size and higher frequency, this usually works out cheaper.
Which suits you
For occasional trading in standard size with a preference for predictable costs, a standard account with fixed spreads is perfectly reasonable. Paying no commission and a wider spread is often cheaper than the reverse at low frequency.
For high frequency, large size, or any strategy sensitive to a pip or two, raw spreads plus commission is almost always the better structure. Calculate your monthly round-trip cost both ways before deciding — the answer depends on your volume, not on marketing.
Regulation is the floor, not the ceiling
Regulation determines what recourse you have and whether client funds are segregated. Top-tier regulators require segregation, capital adequacy, and participation in compensation schemes. Offshore entities offer higher leverage precisely because they offer less of this.
It also determines practical protections such as negative balance protection. Higher leverage is not a free upgrade — it is the visible price of weaker investor protection.
Brokers
Compare and find the best brokers for systematic execution.
Key takeaways
- A market maker may take the other side of your trade; ECN/STP routes externally
- Fixed spreads suit low frequency; raw spread plus commission suits high frequency
- Regulation determines segregation, recourse, and negative balance protection
- Choose an execution model based on your volume and sensitivity, not on advertised leverage
- Market makers can internalise your order and take the other side
- ECN and STP route your order to external liquidity providers
- Raw spreads plus commission usually beat fixed spreads at size
- Regulation determines what recourse you actually have
Comparing brokers only on leverage and bonus offers instead of execution structure.
Reading is not verification
Take the concept you just read and turn it into explicit rules, then test it. That is the only way to know whether it actually works.
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