Dealer Forex Explained: DD vs NDD Models & What Traders Need to Know

Ever wondered who is on the other side of your forex trade？ Is it another trader, a global bank, or the broker itself？

A forex dealer, also known as a market maker or Dealing Desk (DD) broker, creates the market for their clients by taking the opposite side of trades. This is a key point to understand when you trade forex.

It's crucial to know that while a forex dealer is a type of broker, not all brokers are dealers. The way your trades get executed depends on whether your broker uses a Dealing Desk model or a No Dealing Desk (NDD) model.

This guide will explain how a forex dealer works inside their company. We'll look at the big differences between dealers and other brokers, show a real example of a trade, and help you figure out what kind of broker you're using.

How a Dealer Operates

Understanding how a forex dealer works helps explain their business model. The details matter if you want to know where your money goes.

The Dealing Desk

The Dealing Desk works like the brain of the brokerage. It handles all orders, sets the prices you see, and manages how much risk the company takes from client trades.

The Counterparty Role

Think of a forex dealer like a currency exchange at the airport. When you want to buy Euros with your Dollars, they sell you Euros from their own supply.

The process is simple. You place a buy order for a currency pair.

The dealer fills your order by taking the sell position themselves, which means they now hold the risk of that position. They're basically betting against your trade.

Dealer Profit Models

A dealer makes money in two main ways: from the spread they charge and how they handle the risk from your positions.

Their most reliable income comes from the bid-ask spread. They buy at the bid price and sell at the ask price.

After taking the opposite side of your trade, the dealer has a choice to make. They can keep the trade in-house or hedge it with someone else.

Keeping the trade means the dealer hopes your position will lose money, which would be their gain. This is called internalizing the trade.

The dealer can also hedge by opening an opposite position with a bigger bank. This removes their risk and locks in a small profit from the spread they charged you.

The trade follows this path:

• Client Places Trade
• Dealing Desk Receives Order
• Dealer Becomes Counterparty
• Decision Point: Keep Risk or Hedge with Bigger Bank

DD vs. NDD Comparison

The Dealing Desk model is just one way brokers handle trades. The other option is the No Dealing Desk model, which works more like a bridge than an opponent.

What is an NDD Broker？

A No Dealing Desk broker doesn't take the opposite side of your trade. Instead, they pass your orders directly to the bigger market where they find a match.

There are two main types of NDD brokers.

Straight Through Processing

STP brokers send your orders straight to their group of big banks and funds. These providers compete to give you the best prices.

Electronic Communication Network

An ECN gives you the most direct market access possible. ECN brokers send your orders to a network where they match with orders from other traders, banks, and big institutions in real-time.

The Showdown Table

The differences between these models affect everything from the prices you see to whether your broker might want you to lose.

Feature	Forex Dealer (Dealing Desk)	No Dealing Desk (STP/ECN)
Execution Role	Acts as counterparty; creates the market.	Acts as an intermediary/bridge; provides access to the market.
Pricing Source	Sets their own bid/ask prices.	Streams raw prices from multiple liquidity providers.
Spreads	Often fixed and wider.	Typically variable and tighter.
Revenue Model	Primarily from the spread; can also profit from client losses.	Primarily from a small commission per trade or a small markup on the raw spread.
Conflict of Interest	Potential conflict exists, as the broker profits if the client loses.	No inherent conflict, as the broker profits from trading volume, regardless of wins or losses.
Requotes	More common, as the dealer may reject an order if the price moves before they can execute.	Rare to non-existent; orders are filled at the best available market price.
Best For...	Beginners, traders wanting fixed spreads, micro-lot traders.	Scalpers, high-volume traders, algorithm traders, those wanting maximum transparency.

A Trader's-Eye View

Let's see how these models work in a real trade example. This will make the differences clear.

The Scenario

Imagine you want to buy 1 standard lot (100,000 units) of EUR/USD during a calm market.

Path 1: The DD Trade

First, you make the trade with a forex dealer.

Your trading screen shows a fixed price of 1.0750 / 1.0752. The spread is 2 pips.

You click "BUY" and your order goes straight to the broker's dealing desk.

The dealer fills your order right away, selling you 1 lot at 1.0752. Now the dealer is short 1 lot, and they've made 2 pips from the spread.

Next comes their big decision. Their system checks your trade and your history as a trader. They'll either keep the position (hoping EUR/USD falls) or hedge it.

To hedge, they would buy 1 lot from a bigger bank at a better price, maybe 1.0751. This removes their risk and locks in a small profit.

If you place this trade right before big news like jobs data, a dealer might give you a "requote." This is a new, often worse price because their risk suddenly increased.

Path 2: The NDD Trade

Now, let's do the same trade with an NDD broker.

Your screen shows a live market price around 1.07508 / 1.07515. The spread is much smaller at 0.7 pips.

You click "BUY" and your order passes through the broker to the market.

The ECN network quickly finds someone willing to sell at the best price and matches your order. You get filled at 1.07515.

The broker was never your opponent. They just connected you to the market. For this service, they charge a small fee, like $3.50 per lot.

Their job is done. You won't get a requote because the broker has no risk in your trade. The only possible issue is slight slippage if the market is moving very fast.

Is Your Broker a Dealer？

Good brokers usually tell you how they execute trades, but you may need to know where to look. This four-step checklist can help you figure out your broker's model.

Step 1: Account Types

First, look at what they call their trading accounts.

Accounts labeled "ECN," "Raw," or "Pro" almost always use a No Dealing Desk model.

Accounts called "Standard," "Classic," or "Micro" often use a dealing desk.

Step 2: Spreads and Commissions

Next, check how they price their services.

Does the broker advertise fixed spreads that never change, even during big news？ This strongly suggests a dealer model, as only market makers can guarantee prices.

Also look at how they charge you. Is there a separate commission for each trade？ This is typical of NDD accounts. If they advertise "zero-commission" trading, they're probably making money from wider spreads as a dealer.

Step 3: Read the Fine Print

The clearest evidence is in the broker's legal documents.

Open their "Client Agreement" or "Terms of Business" and search for key phrases like "market maker," "counterparty," or "principal." Also look for statements saying "we may take the other side of your trade." Finding these confirms the broker is a dealer.

Step 4: Trading Restrictions

Finally, check if they limit certain trading styles.

Look for rules about scalping, which means opening and closing trades very quickly. Some dealers require trades to stay open for at least one or two minutes.

This is because rapid trading is hard for dealers to manage risk-wise. NDD brokers usually welcome scalping because it creates more volume, which means more commissions for them.

Conclusion: Choosing Your Model

In the end, picking between a dealer and an NDD broker depends on how you trade.

The "Right Fit"

It's important to understand that dealers aren't "bad" and NDD brokers aren't "good." They're just different business models for different types of traders. The key is finding what works for you.

A Forex Dealer is for you if:

• You're new to trading and like the simplicity of fixed spreads.
• You have a small account and need to trade very small positions.
• You hold trades for longer periods, where a slightly wider spread doesn't matter much.

An NDD Broker is for you if:

• You're a scalper, news trader, or use trading robots that need fast execution and the smallest possible spreads.
• You trade large volumes, as your total costs will be much lower.
• You value transparency and want to avoid any conflict of interest with your broker.

The Golden Rule

The most important thing goes beyond the execution model. Whether you choose a dealer or an NDD broker, make sure they're well-regulated, reputable, and honest about how they operate.

Understanding if your broker is a forex dealer is an essential part of doing your homework before you trade.