What Is an NDD Broker?

When you get into trading Forex, you will hear about a lot of different types of brokers. One type of them is called a No Dealing Desk (NDD) broker. NDD brokers provide their clients with direct access to the interbank foreign exchange market without going through a dealing desk. By working with banks and other major market players, NDD brokers are able to offer more competitive bid and ask prices to FX traders. To trade through an NDD broker you will be charged either a spread or a commission, or some combination of the two.

There are two main types of NDD brokers. They are called Straight Through Processing (STP) or Electronic Communications Network (ECN). STP brokers provide direct access between traders and the banks and other liquidity providers which move the market. ECN brokers do all the same things which STP brokers do, except that they also allow their clients to trade directly with each other. When you trade through an ECN, there can be an actual human being on the other side (winning or losing) of any specific trade which you make. With STPs and retail foreign exchange companies, you are trading against banks and brokers.

Why trade with an NDD instead of through a retail Forex company? One of the reasons many traders trade with NDDs is that they offer greater transparency. Many traders feel they are receiving more reliable service since the broker is not acting as a middleman to nearly the extent that a retail FX company would. Some ECNs even let traders keep their money in their own bank accounts while in a trade, as long as their banks issue notes promising to pay should the trade fail. This gives some traders a feeling of greater security while trading with an NDD broker.

Why trade with a retail Forex broker? Since retail Forex brokers do not charge commissions and let you trade much smaller lot sizes, they can be better starting places for new traders who do not have a lot of capital for their trading bankroll. This accessibility can help you to get a foothold in the Forex market and start building up your trading account. It is also easier to trade on most retail platforms since they are usually designed with more sophistication. Retail brokers also allow you to demo test without paying into the system for an indefinite period of time until you feel ready to trade with real money.

There is no one "best" type of FX broker. Every currency trader has personal needs that vary a great deal, and that is why there are so many types of Forex brokers serving the market. Your choice of a broker will probably be determined by how much money you have to trade with, your familiarity with trading platforms, and your feelings about transparency and security. Those needs will change with time as you become a successful trader. When yours do you can always re-evaluate where you stand and switch to a different type of broker.

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Forex trading bears intrinsic risks of loss. You must understand that Forex trading, while potentially profitable, can make you lose your money. Never trade with the money that you cannot afford to lose! Trading with leverage can wipe your account even faster.

CFDs are leveraged products and as such loses may be more than the initial invested capital. Trading in CFDs carry a high level of risk thus may not be appropriate for all investors.