Heather McLean
Heather McLean

DMA, NDD and STP – choosing your agency model of FX trade execution

To trade FX more fairly without the threat of a broker making money from trading losses as well as gains, increasing numbers of retail traders are turning to the wonderful world of Non Dealing Desk (NDD) execution, Direct Market Access (DMA), straight through processing (STP) and electronic communications networks (ECNs). Heather McLean explores these terms in more detail and how they can facilitate more efficient trading and remove major conflicts of interest.

Khurram Ali, sales executive at Valbury Capital, provides a good definition of these new styles of trade execution by explaining that, “In the FX markets, STP usually refers to a broker where client orders are automatically passed through to a liquidity provider without the interaction of a dealing desk. DMA is a specific form of STP whereby the liquidity providers are bank market makers rather than other non-banks, such as hedge funds or other brokers. An ECN refers to an electronic, order-driven market place, where counterparties including banks, other brokers and clients can participate using streaming bid and offer quotes. The ECN’s matching engines internally match orders on a best bid/offer basis, in contrast to an STP model where orders are routed to individual liquidity providers. And NDD means that orders are passed electronically to the market on a matched basis (each order gets executed automatically and directly into the market,) rather than through a traditional dealing (market...continued

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