ECN vs STP vs Market Maker Brokers: What the Labels Mean for Canadians

Forex marketing is full of acronyms — ECN, STP, NDD, DMA, A-book, B-book. Here's what they mean in practice and why, for a Canadian trader, they're less important than they sound.

The three models

Market maker (dealing desk, "B-book"). The broker is the counterparty to your trade. It quotes you a price, usually with a spread, and manages its overall risk internally. When clients lose, the broker gains, which creates an obvious conflict of interest. Market makers can still provide excellent execution — and they don't need to find a matching trade in the market.

STP — straight-through processing ("A-book"). The broker routes your order to one or more liquidity providers (banks or non-bank market makers) and earns a markup or commission. Your loss isn't the broker's gain.

ECN — electronic communication network. Orders are matched in a pool of prices from multiple participants, often with visible depth of market. You typically pay raw spreads plus a commission. True retail ECN access is rare; many "ECN accounts" are STP with raw pricing.

NDD — no dealing desk is a marketing umbrella for STP/ECN.

In reality, most large retail brokers use hybrid models: they internalize some flow and hedge the rest depending on client profiles and exposure.

What actually matters

1. All-in cost: spread + commission + financing. A "commission-free" account with a 1.2-pip spread costs more than a 0.1-pip raw spread with a 0.5-pip-equivalent commission.
2. Execution quality: slippage (especially positive vs negative), requotes, rejections, speed around news. Some brokers publish execution statistics.
3. Conflict management: does the broker disclose how it prices and executes, and whether it acts as your counterparty?
4. Trading-style terms: some brokers restrict scalping, news trading or latency arbitrage.

How to compare real costs

Convert everything to a cost per standard lot round trip (100,000 units, opened and closed):

• Spread-only account, 1.2-pip average spread on EUR/USD: about US$12 per round trip.
• Raw account, 0.2-pip average spread plus US$6 commission per round trip: about US$2 + US$6 = US$8.
• Direct-market-access style pricing with a small percentage commission: often a few dollars, but check minimum ticket charges on small trades.

At 20 round trips a month, the difference between US$12 and US$8 is nearly US$1,000 a year. Ask brokers for average (not minimum) spreads during the hours you trade — minimum spreads in marketing are rarely what you pay.

How Canadian regulation handles this

CIRO dealers must identify material conflicts of interest and address them in the client's best interest, and they must disclose information about how they operate. A Canadian dealer that acts as your counterparty can't hide it — you'll find it in the relationship and risk disclosures you receive when you open an account. Offshore brokers' "ECN" claims, by contrast, are rarely verifiable.

Registered brokers with commission-based pricing

For scalpers

Scalping — holding trades for seconds to minutes — magnifies the importance of costs and execution. Before choosing a broker, check its terms for minimum holding times or "abusive trading" clauses, and measure costs per round trip. A few tenths of a pip matters when your average target is five pips.