Forex brokers that operate through Dealing Desk (DD) brokers make money through spreads and providing liquidity to their clients. Also called “market makers,”
Dealing Desk brokers literally create a market for their clients, meaning they often take the other side of a clients trade.
While you may think that there is a conflict of interest, there really isn’t.
Market makers provide both a sell and buy quote, which means that they are filling both buy and sell orders of their clients; they are indifferent to the decisions of an individual trader.
Since market makers control the prices at which orders are filled, it also follows that there is very little risk for them to set FIXED spreads (you will understand why this is so much better later).
Also, clients of dealing desk brokers do not see the real interbank market rates. Don’t be scared though. The competition among brokers is so stiff that the rates offered by Dealing Desks brokers are close, if not the same, to the interbank rates.
Trading using a Dealing Desk broker basically works this way:
Let’s say you place a buy order for EUR/USD for 100,000 units with your Dealing Desk broker.
To fill you, your broker will first try to find a matching sell order from its other clients or pass your trades on to its liquidity provider, i.e. a sizable entity that readily buys or sells a financial asset