No Dealing Desk (NDD)
What Is No Dealing Desk (NDD)?
No Dealing Desk portrays a trading platform offered by a forex broker that gives unfiltered access to interbank market rates of exchange.
Seeing No Dealing Desk (NDD)
Rather than Dealing Desk, or market-production, brokers, who distribute rates and prices that are comparative, however not equivalent to, the interbank market rates, NDD brokers offer what is known as Straight-Through Processing (STP) execution of forex trades.
Forex brokers who utilize this system work directly with market liquidity providers. While trading through a NDD, rather than dealing with one liquidity provider, an investor is dealing with various providers to get the most competitive bid and ask prices. An investor utilizing this method approaches immediately executable rates. They might utilize electronic communication network (ECN) methods to make it work.
The ramifications of dealing directly with the interbank market are twofold: the size of currency rate spreads and the amount of extra cost to make a trade. With a NDD broker, traders are presented directly to the specific spread accessible to retail customers on the interbank market. Contingent upon the currency pair being traded, and contingent upon the dealing-desk broker being compared, NDD brokers might offer more extensive spreads. That means the cost to make a trade is greater (since retail traders must surrender the value of the spread with each round-trip trade).
Furthermore, a NDD broker might charge an exchange fee or a commission. Since they are passing the spread directly through to the customer, they need to charge fees another way or face bringing in no money for their services. In these two ways trading with a NDD broker might turn out to be more costly after some time by comparison to dealing-desk brokers.
Market Making Brokers
A NDD broker stands rather than market-production brokers who endeavor to in the middle among customers and the interbank market for of making trades (hypothetically) faster and more efficient. To do as such, they acknowledge the risk that they can expect changes in the market alright to shield against market risk.
The intent, on their part, is to make trading advantageous and more affordable so retail traders believe should work with them. To do so they don't aid the trader working directly with the interbank market, yet rather make a market, or at the end of the day offer trades, where they can bring the spread possibly something very similar or even nearer than the interbank market rate. In such a trade, the retail trader benefits by paying less money. The broker benefits since they get to keep the whole spread.
The drawback is that to achieve this, dealing-desk brokers make a market by frequently taking the opposite side of the trade — placing them in a direct conflict of interest with their customers. Inasmuch as they are profoundly proficient at offering such pricing, and not wandering from the interbank rates, this business model benefits the two them and their customers. In any case, that is generally difficult to do, and some dealing-desk brokers have must be exposed to regulatory oversight for running their business models inadequately.
By utilizing a dealing desk, a forex broker who is registered as a Futures Commission Merchant (FCM) and a Retail Foreign Exchange Dealer (RFED) can bring in sufficient money to offset trades and, surprisingly, offer more competitive spreads. On the off chance that a no dealing desk system is utilized, positions are naturally offset and afterward communicated directly to the interbank, which could possibly benefit the retail trader.
Features
- Trading with a NDD broker guarantees the trader that their broker has no conflict of interest with their trades.
- Direct access to interbank rates might help traders now and again however hurt them in others.
- NDD brokers permit customers to trade directly with the interbank rates.
