What is slippage?The price you saw and the price you got are different. That is normal, it goes both ways, and how a broker handles the two directions tells you more than its advertised spread does.Market maker, ECN and STP brokers
Three labels that sound like three business models. Across our hundred brokers they appear 138 times, because most firms are more than one of them - and which one you get can depend on the account you opened.
Broker comparison sites sort firms into ECN, STP and market maker as though these were three shelves and every broker sits on one. It is a useful simplification for about a paragraph, and then it stops being true.
What the labels actually describe is where your order goes after you press the button - and a single firm can route different clients, different accounts and different instruments differently.
How often each label appears in the execution-model field across our hundred records. The labels overlap freely: "hybrid market maker / STP" is a real and common description.
- 138claims across 100 brokersBecause most records carry more than one label.
- 59describe market-maker or principal executionThe single most common model, by a distance.
- 25describe ECN executionAgainst 19 for STP and 13 for no dealing desk.
Nobody is lying. A firm genuinely can internalise one client's order and pass another to the market, which is the point of this article.
What actually happens to your order
There are only two possibilities. Either the broker takes the other side of your trade itself, or it passes the trade out to somebody else who does.
Taking the other side is called B-book, principal or market-maker execution. Passing it out is A-book or agency execution. ECN and STP are two ways of doing the second; market maker is the name for the first. Everything else in this vocabulary is a variation on those two.
The two routes
B-book: the broker is your counterparty
Your buy is matched by the broker's sell. No external trade needs to happen at all.
This is not automatically sinister. A firm with many clients can match a buyer against a seller internally, which is genuinely efficient and often produces a better price than routing both out.
It does create a structural tension: on the unmatched remainder, the firm's position is the opposite of yours. Whether that matters depends entirely on how it is supervised.
A-book: the broker passes it on
Your order is routed to liquidity providers (banks, funds, other institutions) and the broker earns from commission or a small markup rather than from the trade's outcome.
The firm has no position against you, which removes the conflict. It does not remove every cost: you pay commission instead, and the spread you get is whatever the providers are showing.
Execution depends on someone else's liquidity, so in thin conditions the price can be worse than an internalising firm would have shown you.
Twelve of our hundred records describe hybrid execution explicitly. Many more do it without saying so.
The vocabulary, translated
Most of these words describe the same two routes from different angles. Knowing which is which is most of what the terminology is for.
| Term | What it actually means |
|---|---|
| Market maker | The broker quotes its own prices and can be your counterparty. B-book. |
| Dealing desk | There is a desk deciding how orders are handled. Broadly the same thing. |
| NDD / No dealing desk | Orders are passed out rather than handled internally. Covers both ECN and STP. |
| STP | Straight-through processing: orders routed to liquidity providers without manual intervention. |
| ECN | Orders meet a shared pool of prices from multiple participants. Usually raw spreads plus commission. |
| A-book | The broker hedges or passes on your trade. |
| B-book | The broker retains the risk itself. |
| Hybrid | Both, decided per client, per account or per instrument. |
ECN and STP are not the same thing
STP means your order is passed straight through to a liquidity provider without a dealing desk in between. ECN means it enters a shared pool where multiple participants' prices compete, and you can often see the depth behind the top price.
In practice the difference is smaller than the marketing implies, and the honest distinction is usually visible in the pricing rather than the label: an ECN account typically shows a raw spread and charges a separate commission, while an STP account more often shows a spread with the broker's markup already inside it.
Does a B-book broker want you to lose?
The honest answer is that a firm holding the other side of an unhedged position profits when that position loses, and pretending otherwise is silly. The reason this is less alarming than it sounds is that it is not where the money is.
A retail brokerage is a volume business. Clients who lose their deposit quickly stop trading, and the acquisition cost of replacing them is high. The commercially sensible client is one who trades for years, which argues for keeping them alive rather than the opposite. Firms also run risk books that net client exposure against itself, so the position they carry is usually much smaller than the sum of their clients' trades.
None of which is a reason to be relaxed about supervision. It is a reason to weigh the licence more heavily than the acronym.
The execution model tells you what the broker's incentive is. The regulator tells you what happens if it acts on it.
What to look at instead of the label
Since the categories overlap and every firm claims the flattering one, the useful signals are elsewhere. All-in cost on your instrument, not the headline spread. Whether execution statistics are published and whether they include positive as well as negative slippage. Whether the account you are being offered is the raw-plus-commission one or the marked-up one. And which entity and licence are behind it, which is the subject of how to check a broker licence.
A well-supervised market maker with transparent pricing is a better proposition than an offshore firm with ECN in its name. The acronym is the easiest thing to put on a homepage and among the least informative things on it.
Questions people ask about execution models
Is a market maker bad?
Not inherently. Some of the largest and most heavily regulated brokers in the world are market makers, and internalising orders can produce better prices than routing them out. The structural conflict is real and is what supervision exists to manage.
What is the difference between ECN and STP?
STP routes your order straight to a liquidity provider. ECN puts it into a shared pool where several participants' prices compete. ECN accounts usually price as raw spread plus commission.
Does ECN mean no conflict of interest?
It means the broker is not taking the other side of that particular trade. It does not mean the firm has no B-book at all, and many run both.
Which model has the lowest costs?
Neither, reliably. Compare spread plus commission on the instrument and account you would actually use, the model does not decide the answer.
Which is best for scalping?
Whichever gives the lowest all-in cost and the most consistent fills, which has to be checked rather than assumed. Some brokers restrict short-term strategies in their terms regardless of model.
Can I tell which model my broker uses on my trades?
Rarely with certainty. The execution model in the terms describes the firm's general approach; routing can differ by account type, instrument and client.
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Nothing here is financial advice. Leveraged products can lose more than they make.
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