"What is the difference between the DMA and ECN models?"
There are many similarities between the two models in terms of pricing. Both provide clients with access to the interbank market which creates tight pricing with depth of book transparency. In a typical anonymous ECN model, the individual client must have secured their own credit line from a traditional Prime Broker or Prime of Prime provider in order to participate in the ECN. With FOREX.com’s DMA model, we leverage our existing Prime Brokerage relationships to provide customers with access to trade on prices sourced directly from our liquidity providers.
— FOREX.com, https://www.forex.com/en-ca/
ECN is an Electronic Communication Network that links different participants of the Forex market: investment funds, banks, individual traders, etc. The ECN technology allows traders to specify the conditions at which they are ready to conclude the deal and the volume of the order is only limited by the market liquidity. This gives a trader the opportunity to easily execute large-volume orders. Due to advanced price aggregating technology, our clients can benefit from the tightest spreads, low commissions and best real-time price feed.
— Turnkeyforex.com, https://turnkeyforex.com/
We stream a low latency ECN price feed that is ultimately sourced from the best bid and ask prices available at interbank market participants. Depending on account type we charge either volume based commissions or a competitive spread to the feed to ensure client positions can comfortably be covered with third party liquidity providers if we are not able to internally match them.
— Xglobalmarkets.com, https://www.xglobalmarkets.com/
ECN is an electronic communication network that links different participants of the Forex market: investment funds, banks, individual forex traders, etc. To execute your order, the ECN technology searches through all orders placed by its participants in real time. once it finds an opposite order with the matching price and enough volume, your order is executed. There are no intermediaries or dealers involved in the execution process.
— XtreamForex, https://xtreamforex.com/ecn-account/
How does DMA work?
Our DMA service allows you to trade on underlying market prices and depth, but what you’ll actually receive on placing a trade is a CFD from us. It works like this:
DMA displays the best bid and offer price available for a particular market, plus further prices on either side of the order book You place an order, and we instantaneously conduct a margin check to ensure you have sufficient funds to cover the margin on your proposed trade If the margin check is satisfied we place an order in the market and, at the same time, create a parallel CFD between you and us So while you’re trading at market prices, you won’t gain any ownership rights over the equities or currencies that form the subject of your CFD.
— IG.com, https://www.ig.com/en
STP stands for Straight-Through-Processing, which means when you place an order with IMMFX we will simply pass this trade to one of our liquidity providers. These liquidity providers are the largest banks in the world, have deeper liquidity and they are ultimate counter party to your trades.
As an STP brokerage firm we make a profit by marking up the spread. This means that the more trades you make the more money IMMFX makes, which creates a win-win situation for both IMMFX and its clients.
— immfx.com, https://immfx.com/
What is STP? STP is a name given when upon the receipt of a client order, it will pass the order directly to the liquidity provider. STP is a unique alternative which optimizes the speed of transactions by avoiding any interventions of a dealing desk.
Orders are automatically passed to our liquidity providers which then allows us to process trade orders in an efficient and timely manner that will meet the highest level of clients’ satisfaction.
An STP broker in effect will allow its clients to trade during the release times of financial news without any restrictions. No strategy restrictions, trade as you wish whenever you want to.
— TrioMarkets, https://www.triomarkets.eu/
STP vs Dealing Desk Brokers
Dealing desks operate differently to an STP broker whereby the dealing desk will intercept clients’ orders from being passed through to the liquidity provider and take the opposite position, making profit on clients’ losses. This is the reason why, this broker type implements restrictions and limits on stop loss, take profit and pending orders. The logic is simple and restricts scalping and hedging traders the ability to make quick profits from fast order opening and closing and increase the chances of generating losses for the broker. At Yadix, as we do not trade against clients, it is in our interest for our clients to trade successfully and make profits without any trading restrictions. This we believe is the future of honest and transparent forex trading.
— Yadix, https://www.yadix.com/about-us/stp-forex-model/