The short answer
A market maker broker quotes its own prices and usually takes the other side of your trade itself. An STP broker (straight-through processing) passes your order on to outside liquidity providers. An ECN broker (electronic communication network) connects your order to a network where many participants' bids and offers meet.
In practice most retail brokers are hybrids. They route some client flow to outside providers and keep the rest in-house. The label on a website tells you less than the broker's own execution disclosure does.
Who is on the other side of your trade
Every trade needs a counterparty, meaning someone who buys when you sell and sells when you buy. Forex and CFDs trade over the counter, not on a central exchange, so your counterparty is either the broker or someone the broker connects you to. See OTC vs exchange and What a broker does for the background.
The execution model describes where your order goes after you click buy or sell.
Market maker (dealing desk)
You ──order──> Broker's dealing desk
│
└─ broker quotes the price and fills you from its own book
The broker creates its own bid and ask prices, normally based on prices from the wider market, and fills your order against its own book.
- Typical pricing: the spread is the main cost. It may be fixed or floating.
- Execution: often "instant execution". If the price moves before the fill, you may get a requote instead of a fill at a new price.
- Main point for traders: your loss can be the broker's gain on positions it keeps. That is the core conflict of interest.
STP (straight-through processing)
You ──order──> Broker ──passes on──> Liquidity provider(s): banks, non-bank market makers
└─ best available quote fills you
The broker forwards your order to outside liquidity providers and earns from a markup added to their spread, from a commission, or from both.
- Typical pricing: floating spreads that widen when liquidity is thin.
- Execution: "market execution". You get the price available when the order arrives, which can differ from the price on screen. That difference is slippage, and it can work for you or against you.
- Main point for traders: "STP" says nothing about how many providers are used or how good their quotes are.
ECN (electronic communication network)
You ──order──> Broker ──> ECN / aggregated order book
├─ bank bids and offers
├─ other brokers' flow
└─ other traders' orders
ECN broker meaning, in simple terms: your order enters a pool where many participants post prices, and it matches against the best one available. You may see market depth, which is the volume available at each price level.
- Typical pricing: raw spreads that can be very tight on liquid pairs, plus a separate commission per lot.
- Execution: market execution, with partial fills possible on large orders.
- Main point for traders: many retail "ECN" accounts are really STP to a group of providers, not access to a true interbank ECN.
A-book, B-book and the hybrid reality
These are industry terms for what a broker does with each client's risk:
| Term | What happens to your position | Where the broker earns |
|---|---|---|
| A-book | Hedged or passed to an outside provider | Spread markup and commission |
| B-book | Kept on the broker's own book | Spread, plus client losses net of client gains |
| Hybrid | Some flow A-booked, some B-booked, often decided per account or per trade | A mix of the above |
Brokers often B-book small, short-term retail flow and A-book large or consistently profitable accounts. Routing can change over time. For this reason "ECN vs STP" is often a question about account pricing, not about where every order actually goes.
Conflicts of interest, stated plainly
- B-book: the broker profits when clients lose. Regulated brokers manage this with risk controls and best-execution rules, but the incentive still exists.
- A-book: the broker profits when clients trade more volume, whether they win or lose.
- All models: the broker controls the prices you see, the margin rules, the stop-out level and the trading hours. Data errors, wide spreads during news and price gaps affect you whichever model is used.
None of these models protects you from market risk. Leveraged forex and CFD trading can lose money fast, and the execution model does not change that. Read Why traders lose and Risk management.
What it means for spreads and slippage
| Market maker | STP | ECN | |
|---|---|---|---|
| Spread | Often wider, sometimes fixed | Floating, includes markup | Raw, floating |
| Commission | Usually none | Sometimes | Usually yes |
| Requotes | Possible | Rare | Rare |
| Slippage | Less visible, appears as requotes | Yes, in both directions | Yes, in both directions |
| News spikes | Spread may widen or quotes may pause | Spread widens | Spread widens, depth thins |
To compare accounts, add up the whole cost: spread, commission, swap and expected slippage. A low raw spread with a commission can cost more or less than a wider spread with no commission. It depends on the instrument and on your lot size. Work it out with the tools on Calculators, using your own inputs, and see Total trading costs.
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How to check what a broker actually does
- Read the order execution policy and the risk disclosure, not the marketing page.
- Check whether the broker acts as principal (it is your counterparty) or as agent (it passes your order on).
- Look for statistics on slippage and fill quality, if the broker publishes them.
- Test execution on a demo account. Demo fills can differ from live fills, as Demo vs live explains.
- Confirm the regulator and licence directly in the regulator's own register.
The Pakistan context
In Pakistan, Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers. Pakistani authorities have also taken positions on offshore platforms:
- On platform status: per the SECP, offshore forex/CFD platforms operate without regulatory approval in Pakistan.
- On investor protection: per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse.
- On buying offshore products: per the SBP, the purchase of offshore forex/margin/CFD products by Pakistani residents violates section 4(1) of FERA 1947.
- On payments: per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)).
The execution model of an offshore broker does not change any of these points. Before you open any account, read Law and regulators and Regulation and Safety.
Frequent questions
What is the difference between ECN vs STP?
Both pass orders outside the broker. ECN matches orders in a shared order book with many participants. STP routes them to selected liquidity providers. Retail accounts often blur the line between the two.
Is a market maker broker always bad?
No. A market maker can give stable quotes and fast fills. The concern is the conflict of interest on positions it keeps, so regulation and transparency matter more than the label.
What does STP broker mean for my costs?
You usually pay a floating spread that includes the broker's markup, sometimes with a commission on top. Costs rise when spreads widen around news or in thin sessions.
Does an ECN account remove slippage?
No. Market execution means fills can happen at a different price from the one on screen, especially in fast markets. See Slippage.
Can I tell whether my trades are A-booked or B-booked?
Usually not from the platform. The execution policy may describe the broker's general approach, but routing decisions for individual trades are rarely shown to clients.
Which execution model is safest?
None of them makes trading safe. Leveraged trading can lose money quickly under any model. Licensing, how client money is held, and your own risk control matter more.