The Foreign Exchange market is a global decentralized market for the trading of global currencies. Forex brokers provide access to the Foreign exchange market by linking retail and institutional capital to the liquidity of the ECN network of banks.

Understanding the Categories of Forex Brokers

There are two general categories of financial firms offering access to the Foreign Exchange market:

• No-Dealing-Desk Firms (ECN/STP Brokers)

This type of financial broker is electronically connected to the ECN network of banks or the Electronic Communications Network. That means they offer fast trading with low slippage and very tight trading spreads.

□ ECN brokers give their clients direct access to the ECN market; these are usually very large firms.

□ STP brokers route their client orders electronically to a liquidity provider. 

□ Neither ECN nor STP brokers involve human intervention as they pass their clients' orders directly into the global currency market. This is why they are called NDD brokers (No-Dealing-Desk).