last article we have discussed about What is forex trading broker
but if you don’t understand yet or haven’t read it, i suggest you to read it first because it’s important for you for understanding it first,
so please visit here : forex trading broker
as we know, there is many type of forex trading broker, such as : DD, NDD, STP, dan ECN, what is that mean? hhehe that’s what we are figure out …
There are forex trading broker DD, NDD, STP, and ECN. What does it mean? There is also a regulated broker and is not regulated. How to tell the difference? Learn a good look at this page, so that in the future no one choose the forex trading broker.
forex trading broker DD/NDD
Basically, there are two main types of forex trading broker, that broker with the Dealing Desk (DD) and No Dealing Desk (NDD). DD brokers sometimes also known as Market makers, a. ka Brokerage House. While the Broker can be further divided into NDD broker Straight Through Processing (STP) and a combination of STP with Electronic Communication Network (ECN).
DD forex trading broker have benefited through the spread. Broker DD can be create and market their own artificial exchange rates for its clients. Maybe the effect there is little manipulation, but actually is not. Market maker still provides a selection of sell and buy, and they don’t care where the later who will be chosen by the trader.
The hallmarks of a broker usually DD is the facilities they have to offer such high leverage up to 1:1000, interest-free, small spreads (sometimes fixed spread), bonus-bonus interest, until the possibility of easy deposit and withdrawal through party the third.
The shortcomings of the broker is a brokerage, because DD this is market maker aka airport, then the trader simply does not see the real exchange rate in the interbank market which occurs. In addition, they also often take a position contrary to the trader.
For example, you open position buy EUR/USD 1 lot of standards. To fulfill that order, the broker will first seek their WALLET sell order in pairs and the same size of other traders. In this way, they minimize the risk. However, when no other suitable order, then they will open an opposite position with you. Each forex trading broker can have different risk management policy, so even though you know a broker that DD, for certainly can ask first to broker about whether they did or not.
While the forex trading broker NDD, literally meaning “without going through the dealing desk”. Types of forex trading broker who are like this is really being a “bridge” between the interbank market trader. Spread on broker NDD can not fixed because it must always correspond with market prices, and usually greater than the spread brokers DD. If not installed the spread, they could also charge a Commission piece per lot on traders. Broker NDD generally do not trade against the trader’s position.
In addition to brokerage DD and NDD actually there is also a Hybrid broker who runs the double function, as the DD and NDD all at once. This type of broker in general being a bridge for order with lots of small (micro or mini) and when there is an order with large lot then it will process them with STP or ECN.
Types Of forex trading broker ECN/STP
As mentioned above, there are two types of forex trading broker NDD: STP and ECN. What’s the difference?
forex trading broker or trader’s order from STP to divert to their liquidity providers who have access to the interbank market. STP broker usually has a couple of banks/financial institutions as providers of liquidity, and each could have a bid/ask quotes. As a forex trading broker of STP have three liquidity providers each have different rate, then at the same time the system will sort the best rate and then channel it into your platform.
STP Brokers usually benefit from the spread charged on every transaction conducted trader. The spread was added at the rate prices are provided by the provider of liquidity. As a result, spreads on the STP brokers often variable spreads/floating spread, not fixed.
While ECN forex trading broker enables its clients to interact directly with the participants in the market for Electronic Communication Network, including banks, hedge funds, brokers and other traders. Traders in ECN broker also sometimes get to see the “Depth of Market”, or orders buy and sell from other market participants. Because such a system, then the ECN broker usually asks for a large Fund of deposits and charge a Commission per lot traded.
One thing to note here is, some forex trading broker who claim to STP/ECN could have actually used a hybrid model. Account or a mini account Cents offer order with lot of 0.1 or lower, usually can not be sent to the provider of liquidity to the market or because it is too small, so run in DD (Dealing Desk). If there’s a larger volume of orders, they run the appropriate model STP/ECN.
Regulated forex trading broker And Not A Regulated
Related to regulation, forex trading brokerare generally divided into regulated and unregulated flow broker. However, between a regulated forex trading broker any time there is a difference in quality between one another.
To provide a legal basis and guarantee security for traders, many States have specific regulator to regulate broker-forex.
Regulators Elite, intermediate, and an honest forex trading broker Offshore will always proudly declare that they have been regulated by a supervisory agency of the foreign exchange trading, because being a member of the regulatory agency that also did not easy. A great many requirements to be met by a broker to be the forex trading broker who really recognized. However, there are actually differences between each of the associated stringent regulator or whether the supervision and guarantee for traders.
Regulator anywhere nice? The famous tight and perform tasks well, call it an elite class of regulators, is the NFA/CFTC United States Germany, BaFIN FINMA, Switzerland, and Japan, followed by the JFSA FCA United Kingdom and ASIC Australia.
After that there is a middle class of which regulators include the FMA/FSP New Zealand as well as regulators in the area of Euro. In the Euro zone are valid legislation applicable MiFID as a “Passport”, so that a forex trading broker which is already regulated in a Member State of the Euro, then the permissions can be used also in other Euro member States. Including regulators in the Euro zone was the French AMF, CONSOB Italy, Malta, Cyprus CySEC MFSA, and others.
Malta and Cyprus CySEC MFSA is often considered the most loose that regulations compared to other regulators referred to above. Nevertheless, there is still much more loose again, i.e. regulators-regulators in areas such as offshore Belize, St Vincent and the Grenadine, Seychelles, British Virgin Islands, and so on. Even a broker says of himself holding a regulation, but if the location is in these places, then it can be considered tantamount to not regulated.
However, many countries were originally has no regulation nor the regulators about forex, such as Montenegro and Russia. Russia recently at the end of 2014 sets the forex laws, but to early 2016 pun was not effectively apply, so the original forex trading broker Russia generally has not regulated. While in Canada, each area (‘ province ‘) has its own regulator, so regulasinya nationally rather ambiguous.
Security assurance a regulated forex trading broker Excellence Fund is on the security of your funds. The forex trading broker with the NFA/CFTC regulations as tightly as United States must meet strict requirements and monitor periodically from authorities, so small chances for them to cheat or fleeing the funds of their clients. Even if brokers it later went bankrupt and roll mat, has been providing a regulatory system that allows all or part of the client’s funds to be repaid.
In the forex trading broker with the middle class, regulatory requirements and monitor the relative regulator conducted more loose. However, any security assurances inadequate. Examples of mass bankruptcy cases is some forex trading broker beginning in 2015. At that time, some regulated broker FCA United Kingdom FSP and New Zealand became a victim. One year later, a client of the broker regulated FCA United Kingdom was able to request a refund of a portion of the funding (some won’t be back because the brokerage funds inventory is up), but from the FSP New Zealand there has been no news of anything. In other words, the license of the middle-class regulator guarantees the existence of a broker, that forex trading broker is FAKE. However, security funds less.
Meanwhile, a licensed offshore forex trading broker can be said only guaranteed the existence of the Office and his company, because monitoring from regulators are generally very, very loose. If the broker went bankrupt or fled client funds, there are no guarantees at all client money could return. While the broker without a license worth doubted the existence of the company, especially when they do not provide a clear address.
Well, are you going to use a regulated broker or not? It is all up to you. forex trading broker are unregulated flow is usually more lightly in terms of registration, deposit, and withdraw it, but security and sustainability is questionable. While the registration, deposit, withdrawal and a regulated broker usually associated with complication due to anti-miscegenation laws of money laundering, but the client will get extra security guarantees.
How to choose the BEST forex trading broker ??
Find out for tips here : How to Choose the best forex trading broker