With that in mind, let’s take a look at the monetization model of the platform.
1. DD or market maker Market makers profit from betting by making profits and, if necessary, trading against their clients.
For example: if you want to buy a certain amount of/from a type DD foreign exchange broker, the broker will first look for an order to sell euros/dollars for the same amount from the customer order, or take your order directly to the bank.
2, NDD class (1)ECNECN trading platform spread is floating.
Among some brokers, only ECN brokers charge traders commissions, which is also the only way for ECN brokers to make a profit as ECN brokers do not profit through spreads.
(2) The STPSTP broker acts as an intermediary and sends orders from all traders to the bank.
At the same time, the bank sends price differentials and other information to STP brokers.
STP brokers have two options when they receive spread information: one is to fix the spread, the other is to choose the best from a number of banks (the more the better) and let the spread float.
So how do STP brokers make money?
STP brokers, like ECNs, do not trade with traders and make their profits by adding a small amount to the spread they receive from banks.
3. Mixed STP Mode: DD+NDD Many STP brokers use mixed STP mode.
STP brokers will enter into commercial contracts with banks that stipulate minimum transaction sizes acceptable to banks.
In general, for larger orders (usually ¡Ý0.01 lots), the STP broker will send the order directly to the bank.
The bank will not accept orders with small volume (generally ¡Ü 0.1 lots), so the trading platform will not send them directly to the bank.
How does STP broker process such orders?
At this point, they adopt the DD processing platform pattern for internal hedging on the platform.
For mini accounts, this hybrid STP broker basically does just that.