The forex market revolves around three main players: banks, non-financial institutions, and retail traders.
While retail traders don’t have enough rights or financial strength to trade directly from banks, they can only trade through market makers and ECN.
Individual traders may not exist if there are no market maker brokers in the stock world. To kill the confusion, let’s discuss: What is a market maker forex broker?
Market maker forex brokers are institutions that ensure enough liquidity in the market. They earn profit through the spread. They tend to buy up positions from liquidity providers and resell the same positions with marked-up spread to clients. That’s why they are most of the time at the opposing side of any position taken on the platform.
Previously the forex arena was the playground of major participants such as global banks and individuals who trade big lot size. The transaction in those days was only around $1 million or up.
But now, the situation has changed with the entry of retail traders into the financial market. With daily transactions of $4 trillion nowadays, the financial market is highly liquid most of the time.
This has created a lot of space for market maker brokers, and they need not worry about building an inventory of unsold shares.
What Is MM (Market Maker) Broker and His Role
Marker maker brokers are actually market member companies or firms. They have the right to provide both sell and buy quotes through their system to the clients.
They are eligible to accept the risk of holding a certain number of particular currency pairs’ forex positions. They do so to facilitate the trading in that particular currency pair.
The main task of these brokers is to compete with the customer’s order flow. For this, they display buy and sell quotations.
If the customers take advantage of it timely, the market broker will surely honor them.
Once the market maker receives an order, they start getting position and immediately place the offsetting order in the market with its liquidity providers. This process is a game of seconds.
They follow the simple selling model to the clients when they want to buy and burying when they want to sell.
This makes the brokers set the markup and spread higher than regular when real bank spread is invisible to traders.
That’s why many traders question the reputation of market makers. They are found guilty of price manipulation, slippage, and other ways to cheat the traders.
Being a trader, you need not be scared. Many competitive Market Maker brokers offer spread with minimum margin.
On the other hand, if you can trade like market makers, you will become consistently profitable.
What Are Main Responsibilities of Market Maker Brokers
They are also classified as Market Makers and B-Book Brokers. They operate the main dealing desk, and hence they operate the market by acting as intermediaries between traders and liquidity providers.
Below are the main responsibilities of:
- They mainly act as counterparties. They push liquidity factors and thus engaging traders in more buying and selling activity.
- They operate the dealing desk. They monitor all orders placed by traders in a specialized department called the dealing desk.
- They work in close cooperation with major financial institutions such as central banks, large commercial banks, Hedge funds, and Multinational companies.
- Large brokerage companies, Private large market participants, such as major investors.
- They are responsible for the accumulation of placed orders for the specific trading assets.
Pros of Market Maker Brokers
It is important to note that market makers don’t send your orders to large liquidity providers. Instead, they internalize the risk for all opened positions.
In simple words, they have to pay from their pockets for all positive trades. Below are a few advantages of MM brokers:
- No need for the big initial deposit
- Client Support through live chat rooms, technical analysis, and news
- Provides a variety of educational material such as ebooks and online tutorials.
- Offers popular user-friendly trading platform Metatrader 4 or MT4
- Fixed spread
- Fixed Leverage
- No commission fees
Cons of Market Maker Brokers
Unfortunately, market maker brokers have a poor reputation in the forex world. The main reason for this misfortune is misinformation.
Let’s see what the main disadvantage of them are:
- Manipulation may occur in the form of slippage or sudden change in a stop-loss order
- It believes that forex brokers want you to lose.
- Spread is not as tight as ECNs, and it’s very costly.
- Requotes are common problems in high volatility
- Scalpers are discouraged
- The server may slow down or freeze during important financial news
List of Top Market Maker Brokers
Market Makers are the best option for low-budget traders. This is because they offer low capital requirements and user-friendly trading platforms.
As you know, they only charge the difference of the spread. The total number of forex brokers is 1231.
Below is a list of best market maker brokers:
List of Top Market Maker Brokers
|Market Maker Broker Name
| Accent Forex Company
|MT4, MT5.Pro Trading Forms, Act Trader. etc
| ADS Securities LLC
| Amana Capital
|MT4, MT5, Pro trading, propriety trading
| Atlas Capital FX
| ATS MARKETS GLOBAL
| Back Bay Markets
| Boston Merchant Financial-BMFN
| City index
| Destek Markets UK Ltd
How do market makers trade forex?
Market makers set bids and ask prices and execute them on screen. They are ready to do some transactions from customers at these prices.
They create liquidity in the market to engage buyers and sellers.
What do market makers do?
They provide trading services and act as intermediaries between traders and institutions. They boost liquidity to create activity in the market.
What is the difference between ECN and market maker?
ECN stands for electronic communication network. Market makers set bid and ask prices on their system and display them publicly.
Whereas ECNs set bid and ask prices based on pass on prices from multiple market makers and participants.
If you are serious professional traders, market-making brokers are not the best fit for you.
For beginners with low capital, such brokers are the best option. Beware of choosing a broker as they can trade against you.
Do proper research, read reviews before selection. Many brokers have websites where you can get in touch with them through chat rooms.
Which market maker forex broker is your next choice? Don’t forget to share with us. Happy Trading!