In the previous article, we went over the work principles of the main two broker types: a MarketMaker and an ECN broker. Today, we're going to talk about the main source of income for companies. We used to hear a lot and talk about the brighter side of the coin: advantages, rewards, leverages, super-profits. However, there is a very important question: where does their bread and butter come from?
Let's review the sources of income of two broker types: A MarketMaker and an STP broker.
MarketMakers create the market, setting the bid and ask prices on their assets. MM's make profit on the spread, because they always buy cheaper than sell. They take their rates from various sources, such as large banks and other MM's. After that, they use special software to generate their own rates and offer them to their clients. MarketMakers' objective is to provide liquidity at their own price. That means that they don't bring buyers and sellers together. MarketMakers stand on the other side of the fence, acting like a direct counter party in a transaction. The profit goes to a MarketMaker if a client loses their deposit.
Fees on transactions serve as the only source of income for an STP broker. STP brokers offer real prices to the client without changing the market rates. There are no other sources of income for this type of broker. There might be different ways of charging fees. separately for opening and closing of a lot, or a doubled fee at one time. Of course, an STP broker does not have the chance to get a superprofit that MarketMakers get in the case a client loses their deposit. However, due to a large demand on their services, an STP broker can enjoy a steady profit from the fees.
A trader can estimate all their expenses in advance if he's dealing with an STP broker. It's important to understand that an STP broker does not bear any risks, that's why there is not reason for them to hinder their clients success. If there is no conflict of interests, that means your broker is on your side, and that changes everything! An STP broker is interested in his client trading longer and achieving higher results.
Many Bucket Shop companies intentionally provide false information about their work principles purporting themselves as STP brokers. You should only deal with verified companies if you don't want to be scammed.
FXFINPRO CAPITAL is a reliable regulated STP broker with flawless reputation that offers all services necessary for successful trading and investments. Table of tariffs and fees is publicly available at the main page of our website. Also, you can check the regulation and legal documents in the "About us" section.
Our goal is to make people successful and happy, and we have all the necessary instruments: a professional team of portfolio and risk managers, client support service, 2 trading platforms, and more.
FXFINPRO CAPITAL: Start on your way with a reliable broker.