A broker Non Dealing Desk (NDD) is a company that employs a system that directly match orders from their liquidity providers (institutional traders and banks) with their regular customers (retail traders). Different suppliers of liquidity of the system send their best prices to buy / sell (bid / ask) and the broker send these prices to its trading platform, so the customer has at his disposal the best market quotes that can offer the company to open/close long and short positions.
For this reason, a NDD broker does not become the partner of their clients in such transactions in the market (as in the case of Market Makers). However, under normal circumstances these brokers can increase the spread offered (which these companies usually do). In fact, this is the way by which the NDD brokers make the profits for the brokerage services offered to its customers.
Advantages of Non Dealing Desk Brokers
- There is no inherent conflict of interest: The true NDD brokers do not operate against their clients. As facilitators of transactions, these companies do not enter the market and open positions that can sometimes be in direct conflict with the interests of the traders that trade with them.
- Market access: This type of brokers, offers every trader, big or small, equal access to the interbank market. Quotations (bid price and ask) in a Non Dealing Desk platform are not those established by an individual broker, but those derived from active trading among various market participants such as banks, institutional investors and individual traders among others. The process itself makes each trader in a Market Maker regardless of whether it operates with large volumes or volumes rather modest as most individual traders.
- Anonymity: All operations are conducted independently and in total anonymity. The NDD brokers does not know and do not need to know the details of the positions of the client, so the stop loss orders are not and can not be altered when the broker has the need to meet liquidity requirements, as sometimes happens with Market Makers.
Note: There is growing suspicion that some Market Makers brokers suddenly and unreasonably raise the prices to take out positions when it suits their purposes. In some cases, we are talking about brokers that increase regularly their quotes up to 10 pips or even more and for a variety of reasons ranging from complete unbalanced operations, leveraging the broker’s own account or to meet liquidity requirements. However, although this practice is observed in some of these companies is difficult to prove. Of course not all the Market Makers have such practices and in fact there are brokers of this category that are a good choice for traders who wish to open an account and trade with them.
- Price intervention: In the Non Dealing Desk Brokers both the market quotes and the bid/ask prices come directly from the interbank system. For this reason, these prices are not filtered or manipulated to maintain established profit margins (not reported), or suddenly elevated by the broker to gain an edge in trading.
- Reorders: In a NDD broker these are practically nonexistent. Customers never get reorders from a broker of this type because for a Non Dealing Desk the reorders have no purpose. The broker has nothing to gain or offset with the use of reorders therefore these are not used under any circumstances as these are not necessary.
- Transparency: With a NDD broker there is no hidden manipulation of prices or any other similar game that may go against the interests of the client. Simply what the trader see in the trading platform is what he get.
- Disclosure of information without restrictions: The commissions of the NDD brokers are limited, well defined and clearly disclosed so there is no room for confusion. The trader always be aware of the cost of each transaction
Main perceived disadvantages with respect to NDD Brokers
-The transaction costs: At present, many traders still believe there is such thing as commission free trading, a myth that remains in the mind of the people thanks to the dealing desk brokers (Market Makers) and publicity that inundate the Internet. Despite what these brokers would like us to believe, the so-called commission free brokers charge a fee or commission for each trade executed by the client. The difference with respect to NDD brokers is that the commission that they charge is fully disclosed, while in the case of the dealing desk brokers this usually does not occur.
Occasionally, the fixed spreads offered by a dealing desk may affect the profitability of traders trading with them as they are tied to the same spreads all the time, whether at a given time the market offers lower spreads than the same broker. Instead of executing a market order, the broker responds with a reorder which assures a fixed and not disclosed benefit, while simultaneously depriving the trader the opportunity to gain an advantage with the price movement.
-The spreads are variable, not fixed: Because the Forex is a extremely fluid market, the spreads are in a constant state of flux and when a trader trades through a Non Dealing Desk broker, he/she can have access up to a dozen or more banks and other liquidity providers that offer their best prices. The most attractive prices always appear above the others. During periods of increased activity in the market, the spreads can be reduced to zero, a fact that many customers of dealing desk brokers are unaware. Off course during the hours when the market moves less, the spreads may be considerably higher due to low activity.
In summary, NDD brokers do not offer trade execution based on fixed spreads. Basically their profit is obtained by charging a nominal fee for each transaction made by the trader. This is not the case of Market Maker brokers. Whether the interbank spreads are high or low, these brokers adjust their quotes to ensure certain gains for their fixed spreads. Also, some Market Makers generate an undetermined and undeclared amount of earnings from trading against their own customers.
List of Non Dealing Desk brokers
The following is a list with some NDD brokers that allow to trade in the Forex market and with other financial instruments. In most cases, these brokers offer their clients trading accounts with Non Dealing Desk execution and Dealing Desk execution so the trader can select the option that is most appropriate.
|Broker||Regulation||Minimum deposit (USD)||Complete Review|
|Neto Trade||No information||100||Review|
|GCI Financial||No information||500||Review|
|World Wide Markets||Yes||100||Review|