What is a Market Maker in Forex Trading?

Q: What is a Market Maker in Forex Trading?

A Market Maker (or Dealing Desk broker) creates the market for their clients by taking the opposite side of trades. They offer fixed spreads, no commission, and instant execution, but may have conflicts of interest since client losses can be their profits.

Understanding Market Maker Brokers

A Market Maker Broker (also called a "Dealing Desk" or "DD broker") is a forex broker that creates their own market for clients by taking the opposite side of your trades. When you buy, they sell to you, and vice versa - they literally "make the market" for you to trade in.

How Market Makers Work

The market maker business model:

Broker is your counterparty - Your order doesn't go to the real market; the broker takes the other side
Internal order matching - They may match your order with another client's opposite order
Fixed spreads - Spreads are typically wider but consistent regardless of market conditions
Price control - They set their own bid/ask prices (usually close to interbank rates)

Market Maker Features

Fixed Spreads

Spreads stay the same 24/5, making costs predictable (typically 1-3 pips)

No Commission

Profit is built into the spread - no separate commission fees

Instant Execution

Orders execute immediately at broker's quoted price (may have requotes during volatility)

Low Minimum Deposit

Often start from $50-$100, making forex accessible to beginners

Advantages of Market Makers

Why some traders prefer market maker brokers:

Predictable costs - Fixed spreads mean you always know trading costs upfront
No commissions - Simpler pricing structure for beginners
Beginner-friendly - Lower barriers to entry with small minimum deposits
Guaranteed fills - Broker is obligated to take your trade
Stable during news - Spreads don't widen as much during volatile events (though requotes increase)

Disadvantages of Market Makers

Potential drawbacks to consider:

Conflict of interest - When you lose, the broker profits (and vice versa)
Wider spreads - Typically 1.5-3 pips vs 0-1 pip with ECN brokers
Requotes - During fast markets, your order may be requoted at a worse price
Possible restrictions - Some brokers limit scalping or certain trading strategies
Less transparency - No access to real market depth or liquidity

Market Maker vs ECN Comparison

Feature	Market Maker	ECN Broker
Spread Type	Fixed (1.5-3 pips)	Variable (0-1 pips)
Commission	None (built into spread)	$3-$7 per lot
Execution	Dealing Desk	Direct Market Access
Requotes	Yes, during volatility	Rarely/Never
Min. Deposit	$50-$100	$500-$1,000+
Best For	Beginners, small accounts	Professionals, scalpers

The Conflict of Interest Question

Understanding the market maker profit model:

B-Book model: Broker takes opposite side of your trades - profits when you lose
A-Book model: Broker hedges your trades with liquidity providers - only makes money from spreads
Hybrid model: Most market makers use both - profitable traders go to A-Book, losing traders stay in B-Book

Is a Market Maker Right for You?

Market makers are ideal for:

Complete beginners - Simple pricing, low minimums, predictable costs
Small accounts - Can start with $50-$100
Swing traders - Fixed spreads work well for longer-term positions
Low-frequency traders - Trading occasionally won't benefit much from ECN tight spreads

Choosing a Reputable Market Maker

Not all market makers are equal. Choose well-regulated brokers (FCA, ASIC, CySEC) with good reputations. Avoid brokers that: (1) Offer unrealistic bonuses, (2) Have consistent negative reviews about withdrawals, (3) Are offshore with no regulation, (4) Restrict profitable strategies. A good market maker can be perfect for beginners - a bad one can be a nightmare.