When you place a trade with a forex broker, someone has to take the other side. Two broad execution models handle this, and the difference affects your costs, execution quality, and the broker's incentives: the market maker model (dealing desk) and the ECN/STP model (no dealing desk).

What a market maker is

A market maker is a firm that quotes both a buy and a sell price in a tradable asset held in inventory, earning profit on the difference — the bid–ask spread. The U.S. Securities and Exchange Commission defines a market maker as a firm that stands ready to buy and sell securities on a regular and continuous basis at a publicly quoted price. In foreign exchange, most trading firms and many banks act as market makers: they buy currency from some clients and sell it to others, deriving income from price differentials while providing liquidity.

In retail forex, a dealing-desk broker typically internalizes client orders — matching buys against sells within its own book and taking the opposite side when there is no internal offset. This is not automatically bad: it enables instant execution at quoted prices, small minimum deposits, and micro-lot trading, because the broker is not passing every tiny order to a bank.

What ECN and STP routing are

An electronic communication network (ECN) is a computerized system that matches limit orders between participants and disseminates those orders to third parties, permitting them to be executed against it in whole or in part. ECNs are passive, computer-driven networks that match orders and charge a small per-transaction fee. The term originated with the SEC in the 1970s; the first ECN, Instinet, launched in 1969.

Straight-through processing (STP) is a related model: the broker routes client orders directly to liquidity providers — banks and other market makers — rather than dealing them internally. Many retail "ECN brokers" are more precisely hybrid STP/ECN routers: they aggregate quotes from several providers, add a markup or a commission, and forward the order.

Cost structures differ by design

The two models charge differently for the same underlying service — getting your order filled.

• Market maker / standard account: costs are bundled into the spread. You see one price; the broker's margin is inside it. There is usually no commission.

• ECN/STP account: the spread is close to the raw interbank level, and the broker charges a fixed commission per lot, per side (per trade round trip).

Worked example, purely illustrative: trading 1 standard lot of EUR/USD where 1 pip is worth about $10, over 10 round-trip trades. A standard account pricing a 1.0-pip spread costs 1.0 × $10 × 10 = $100. A raw-spread account pricing 0.1 pips plus a $3.50-per-side commission costs 0.1 × $10 × 10 = $10 in spread plus 10 × $7 = $70 in commission — $80 total. These figures are hypothetical pricing, not quotes from any specific broker; actual pricing varies by broker, account tier, and instrument.

Note that neither model is universally cheaper: pricing, execution, and service vary broker by broker, so compare total cost for the instruments and trade sizes you actually use.

Execution differences

Because a dealing desk controls the price it shows, it can fill instantly at the quoted price — but it can also requote or add restrictions on order size when its book is imbalanced or volatility spikes. ECN and STP routing pass your order to external liquidity, so fills follow the market: spreads widen with news and liquidity, and slippage can go in either direction. Most ECN accounts support larger sizes and algorithmic trading, but there is no guarantee of a fill at a displayed price during fast markets under either model.

The conflict-of-interest question

With a dealing desk, the broker profits when clients lose on internally held positions, because it takes the other side of the trade. That is a structural conflict of interest — it does not mean the broker manipulates prices, but it means the incentive exists and regulation matters. With ECN/STP routing, the broker earns its commission regardless of whether you win or lose, which reduces that conflict — though the broker still chooses which liquidity providers it routes to and what markup it adds. A regulator license does not make either model safe by itself; it determines who checks the broker and what protections apply.

How to check what your broker actually runs

Marketing labels are unreliable; verify instead.

1. Read the legal documents: the order-execution policy and client agreement should state whether the firm acts as principal (counterparty) or as an agent/router.

2. Check the fee schedule: an account with commissions plus near-zero spread is the ECN/STP pattern; a spread-only account is the market-maker/standard pattern.

3. Confirm the regulator: look the firm up on the register of its claimed regulator (FCA, ASIC, CySEC, and others), and match the exact contracting legal entity.

4. Be skeptical of "true ECN" claims on offshore-licensed entities — the label is marketing, the license and legal documents are not.

Takeaway

Execution models are a trade-off, not a ranking. Market makers trade convenience (bundled pricing, instant fills, small sizes) against a structural conflict of interest; ECN/STP brokers trade a commission on top of raw spreads for reduced conflict and market-driven fills. What matters for your decision is verifying the model in the legal documents, comparing total cost on your actual instruments, and confirming regulation with the exact legal entity that holds your money.