ECN vs Market Maker · Who's on the other side of your trade?

Three main models

Market Maker (MM / Dealing Desk / B-Book)

The broker is your counterparty. You win = they lose; you lose = they win.

Surface conflict of interest. But large MMs (IG / CMC / OANDA) run internal hedging pools: long clients offset short clients, residual net exposure hedged externally.

Profit sources:

• Spread (wider, 1-2 pip)

• Swap differential

• Loser losses (residual pool)

STP

Broker forwards your order straight through to upstream LPs. Profit: spread markup (+0.3-0.8 pip on raw LP quote).

ECN

Broker drops your order into a liquidity pool with other ECN participants (banks, hedge funds, other retail) — direct matching.

Profit: fixed commission ($3-7 round-turn per standard lot), zero spread markup.

See EUR/USD quoted 1.0870.0 / 1.0870.2? That's ECN (5-digit pricing).

How to pick

• Day-trading / scalping → ECN (tight spread + low commission)

• Swing trading → STP (moderate spread, no commission, low multi-day cost)

• Beginner + small size → MM (no commission + educational resources)

Spotting lies

Many brokers claim "True ECN" but are STP/MM hybrids. Tells:

• True ECN always offers Level 2 (depth-of-market)

• True ECN charges commission (how else does it earn?)

• True ECN doesn't restrict scalping / HFT