The three execution models
Market Maker (Dealing Desk)
A market maker takes the other side of your trade directly. When you buy EUR/USD, the broker sells it to you from its own book. The broker profits when you lose.
This creates a conflict of interest that regulators monitor — FCA and ESMA-regulated market makers are required to execute at the best available price regardless, but the incentive structure is worth understanding.
Brokers that use market-maker models: eToro, Plus500, most “zero commission” retail platforms.
The spread is the primary revenue mechanism. A 1.0-pip EUR/USD spread means the broker is marking up the interbank rate by approximately 0.7–0.9 pips on every trade.
STP (Straight Through Processing)
An STP broker passes your order directly to liquidity providers (banks, hedge funds, other brokers) without a dealing desk. The broker makes money on a small markup to the spread or a transparent commission. Your order is filled at the liquidity provider’s price, not the broker’s invented price.
STP brokers do not take the other side of your trade — they make money from volume regardless of whether you win or lose.
ECN (Electronic Communication Network)
An ECN broker aggregates prices from multiple liquidity providers and routes your order to the best available price from that pool. ECN typically offers the tightest spreads (often 0.0–0.3 pip on EUR/USD) combined with a flat commission per lot.
The OANDA Core account and Pepperstone Razor account are ECN-style models: near-zero spread, $5–$7 commission per round-turn lot.
Why this matters for your app choice
| Model | Who profits from your trade | Typical spread | Commission | Conflict of interest |
|---|---|---|---|---|
| Market Maker | Broker profits from your spread on every trade | 0.8–2.0 pips | None | Yes (structure; mitigated by regulation) |
| STP | Broker earns markup regardless of outcome | 0.3–0.8 pips | Small or none | Minimal |
| ECN | Broker earns commission regardless of outcome | 0.0–0.3 pips | $5–$7/lot RT | None |
The practical implication: at high trading volumes, ECN is cheaper. At low volumes (below 5 lots/month), the minimum commission on ECN accounts can make them more expensive than STP or market-maker accounts.
Verifying a broker’s execution model
Legitimate ECN/STP brokers disclose their execution model in their regulatory documentation. Ask for:
- The liquidity provider list (ECN brokers have named bank/institutional counterparties)
- The “best execution” policy document (required by FCA/ESMA-regulated brokers)
- Slippage statistics on past orders (legitimate ECN brokers can provide this)
A broker claiming “ECN” but unable to name its liquidity providers or provide execution statistics is likely STP or market-maker with ECN marketing language.
See also: Spread · Pip · Leverage
Used in: Pepperstone review · OANDA review · Interactive Brokers review