For example, if an investor wants to buy dollars, in this mode, the trader will take out dollars from his own platform and sell them to the investor, not the dollars in the market, and vice versa. Therefore, there will be a phenomenon that the buying and selling price of investors is different from the actual price in the banking market, which also directly causes the phenomenon that every transaction of investors is "gambling" with the brokerage platform. Because the money held by investors comes from brokers, brokers are bound to conduct opposite transactions with investors, and the result is nothing more than investors' profits, brokers' losses or investors' losses. Dealers are profitable. This is also one of the main reasons why many people criticize market makers.
However, existence is reasonable. This trader model is the original form of foreign exchange broker. With the intensification of competition among foreign exchange brokers, under free competition, market makers in the trader mode will have to compromise on the price in order to attract more customers, which is basically close to the price in the interbank market.
It should be noted that in this mode, because the interests of brokers are completely opposite to those of investors, some non-compliant brokers will delay the trading orders of some investors, resulting in problems such as slippage and repeated inquiry. In addition, this model with traders is risky. If the qualification of the brokerage platform traded by investors is unqualified or the financial strength is weak, once there is a large-scale loss, it is easy to cause the brokerage to run away or close down.
The non-trader mode is called NoDealingDesk, or NDD for short, that is, a platform without traders. Under the trader-free mode, the interests of foreign exchange brokers are no longer directly linked to investors, and the trading orders issued by investors will be directly fed back to banks, investment companies, investment funds and other peer markets. Brokers play the role of intermediary bridge in the middle, making profits by collecting commissions or relying on spreads. Compared with the trader mode, investors in this mode rarely re-quote and delay placing orders.
There are two kinds of trader-free modes, one is STP mode and the other is ECN mode. STP mode is straight-through processing, which means straight-through processing. STP mode will directly transfer investors' instructions to banks and other interbank markets, and investors can trade freely according to market prices, which is the most typical non-trader mode. STP mode ECN mode is called electronic communication network, that is, electronic communication network. In this mode, investors' orders can not only be sent to the interbank market, but also exchanged among investors. ECN is called the most transparent mode because it concentrates the quotations of major inter-bank markets such as banks and brokers and other investors on the system, so investors can observe the detailed status of major orders on the system and place orders on this basis. It is worth mentioning that in ECN mode, because the price is directly reflected in the system for investors' reference, it is difficult to obtain benefits through price difference as in STP mode, so brokers in ECN mode will charge investors a certain commission.
In addition, there is an STP+ market maker model in the market. In this mode, some large orders will directly pass STP mode, while some small orders will be intercepted by brokers and use market maker mode. This model needs investors' vigilance, because many brokers will claim to adopt the no-trader model, but in fact they will secretly gamble with investors through careful operation.
From the perspective of fairness and transparency, non-trader mode is better than trader mode, and ECN mode is better than STP mode. Of course, different brokers will have different experience effects, and formal market makers or STP models can also conduct effective and fair transactions for investors. The key lies in whether the selected securities firms are legal and formal, and whether the selected model conforms to their own investment habits, which are worthy of attention.