ECN, STP and market maker brokers – what the execution model means for you

"ECN broker" is one of the most overused marketing labels in retail forex. Understanding what actually happens to your order helps you judge costs, slippage and conflicts of interest.

#Market maker (dealing desk)

The broker is the counterparty to your trade. It quotes its own prices (based on the wider market), takes the other side of your position and manages the combined risk of all clients – often internalising offsetting trades and hedging the net exposure.

• Pros: fixed or stable spreads, small trade sizes, simple pricing, guaranteed fills in normal markets.
• Cons: a potential conflict of interest, because the broker can profit when clients lose on unhedged positions.

#STP (straight-through processing)

The broker passes orders to one or more liquidity providers – banks and non-bank market makers – and adds a mark-up to the spread or charges a commission.

#ECN-style / agency

Orders are routed to a network or venue where multiple participants quote. Spreads can be very tight, and the broker charges commission. True ECN access with visible depth of market is rare at retail level; most "ECN accounts" are STP with raw pricing.

#Hybrids are the norm

Most large retail brokers run a hybrid model: they internalise some flow, hedge some, and pass some to liquidity providers depending on size and client profile. The label on the account type tells you about the pricing, not necessarily about where your trade ends up.

#What EU rules require

• Best execution: MiFID II requires firms to take all sufficient steps to obtain the best possible result for clients, considering price, costs, speed, likelihood of execution and settlement.
• Order execution policy: every firm must publish one and tell you where it executes orders.
• Conflicts of interest: firms must identify, manage and disclose conflicts – including being the counterparty to client trades.

#What to look at instead of the label

1. All-in cost – spread plus commission – at the times you trade.
2. Slippage statistics – some brokers publish how often orders are filled at better, equal or worse prices.
3. Behaviour in fast markets – requotes, rejections and freezes during news.
4. Restrictions on scalping, news trading or minimum holding times, which usually reveal a market-maker model that dislikes certain flow.

If you are a scalper or trade around news, these differences matter far more than the name of the account.