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ForexNinja

A market maker basically reduces transaction costs and increases liquidity, making it easy for its clients to trade. The efforts of market makers are compensated through the bid/ask spread they themselves set. In addition, these market makers take the opposite side of their clients’ trade. Whenever their clients sell, they must buy from their client and vice-versa. There are exceptions though. Sometimes, these market makers try to cover orders by matching the initial buy/sell order with another client. An electronics commission network (ECN) broker, on the other hand, derives currency prices from several sources such as banks, market makers and other traders and firms connected to the ECN. Unlike market makers, ECN brokers do not set prices themselves and therefore, they generally offer the best bid/ask quotes for their clients. Furthermore, ECN broker prices are not fixed and change depending on a currencies trading activity. These firms make money through charging their customers a fixed commission per trade. There are pros and cons for both types of brokers mentioned and there certainly isn’t a “better” one. It all depends on the individual traders on what is better suited for him or her.

over 2 years ago