What Are ECN, NDD, STP, and DMA Accounts
When starting to trade in the Forex market, a trader quickly encounters many challenges that aren’t directly related to trading itself. One of the main challenges is choosing the right type of account.Today, brokers offer a wide variety of accounts, and the best options can be found in our "Trading Accounts" section. To select the most suitable one, a trader needs to be well-informed about all the key differences and nuances.
How It All Began
The diverse range of Forex account types we see today didn’t always exist. When Forex trading first emerged, most brokers provided only one type of account: the DD (Dealing Desk) account. In this setup, a Forex broker acts like a dealing desk, processing orders internally and then sending them to the interbank market.The only real advantage of a DD account is the low entry barrier for traders. Some brokers allowed trading with as little as $10. But that’s where the benefits end, and the problems begin. The most common issues include:
- Discrepancies between broker quotes and the market.
- Slippage and requotes.
- Wide fixed spreads.
The very concept of a Dealing Desk implies a conflict of interest. The broker has an incentive to trade against the client, profiting from their losses. This is why more suitable alternatives quickly began to emerge.
NDD Account (No Dealing Desk)
An NDD (No Dealing Desk) account is a type of account that provides direct access to the interbank Forex market without the involvement of a dealing desk. By working with multiple liquidity providers (banks, hedge funds, and other major market players), NDD brokers offer more favorable conditions for currency traders. In this setup, the broker earns not from the trader’s losses, but through floating spreads, additional commissions, or a combination of both.There are two main types of NDD accounts:
- STP – Straight Through Processing technology.
- ECN – Electronic Communication Network.
The STP technology ensures direct interaction between traders and liquidity providers. The ECN network achieves the same, but unlike STP, it allows traders to trade not only with banks and retail Forex companies, but also directly with each other.
ECN Account (Electronic Communication Network)
An ECN (Electronic Communication Network) account is based on a network of electronic communications that provides clients with direct access to all participants in the Forex market. The ECN broker does not participate directly in trades. Instead, it acts as a router, instantly forwarding traders’ orders to liquidity providers. Since the ECN broker is not a counterparty to the trade, it cannot trade against the client.The main strength of an ECN account is diversification — traders can trade with multiple liquidity providers and with each other. A direct result of this is tight spreads.
Key points:
- An ECN broker is an automated communication network that provides clients with direct access to all market participants.
- ECN accounts ensure transparent trading and high liquidity, but they are generally more expensive, as the broker compensates for tight spreads with additional commissions.
An ECN account offers the best conditions for traders who prefer maximum flexibility. Another advantage is the impossibility of price manipulation, as all trade information is easily verifiable. Furthermore, all traders have equal access to the system, preventing any single participant from gaining an unfair advantage.
STP Account (Straight Through Processing)
An STP (Straight Through Processing) account is a type of account where client orders are sent directly to liquidity providers (straight-through processing). Liquidity providers include hedge funds, banks, investment corporations, other brokers, and retail Forex companies. Similar to ECN accounts, the broker does not filter orders through a dealing desk. The absence of dealing desk intervention is what makes trading on STP accounts fast and efficient.Difference Between STP and ECN
In practice, there is only one main difference: with an STP account, the trader receives prices only from liquidity providers, not from all market participants. As a result, entering the market can be slightly more difficult, and spreads are somewhat wider. Additionally, the STP technology theoretically gives brokers opportunities for manipulation, since orders are first accepted by the broker and then hedged through their liquidity providers. However, nowadays, only the most unscrupulous brokers engage in such practices.DMA Account (Direct Market Access) — The Most Advanced Account Type
Just as traders were getting accustomed to all the features of STP and ECN accounts, brokers introduced a new type of market access — Direct Market Access (DMA). At first glance, DMA technology may seem very similar to STP, but there are key differences.The true attributes of a DMA account are:
- Market execution only.
- Floating spreads only.
- 5-digit quotes only.
An additional bonus: access to the DOM (Depth of Market), a tool showing the number and distribution of limit orders for buying and selling at different price levels, allowing traders to see market liquidity and participant activity.
DMA vs STP
An STP broker processes client orders themselves and hedges them through their own liquidity providers. Since the broker seeks profit from this process, the price the trader receives is usually worse than the best price which the broker obtains directly from the liquidity provider.With a DMA account, the broker does not perform any actions themselves — they simply forward client orders directly to liquidity providers, where they are executed at the best available price (plus a small fixed markup from the broker). This is done through Market execution, which guarantees that all orders will be executed at the best available price. Since DMA technology always works only with real tradable prices, there are no requotes or delays.
DMA vs ECN
Prices in a DMA system are transmitted directly from liquidity providers to traders. This ensures that there are no requotes or price deviations.At the same time, due to the features of ECN liquidity pools (where anonymous participants can place orders and then withdraw them), traders may experience requotes and slippage.
ECN brokers earn profit through floating spreads and commissions, whereas DMA accounts typically add a small fixed markup to spreads but do not charge a commission. Some DMA brokers may also charge a monthly fee based on the trader’s volume.
Therefore, for those planning to trade frequently, in large volumes, or actively, DMA can be a good choice. The slightly higher cost of use is an acceptable price for the privilege of trading at the best prices with the lowest spreads.
Choosing the Right Account Type
Choosing the most suitable account type usually depends on the trading strategy a trader prefers to use. Additionally, trade volume and the frequency of opening trades can be important factors.However, there is one universal piece of advice — avoid using a Dealing Desk account. Despite its low entry barrier, this type of account does not allow beginners to practice effectively. Potential conflicts of interest and non-transparent pricing prevent trading under real market conditions, making such practice essentially worthless.
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Overall, trading EUR/USD ends up costing about 0.5–0.7 pips (spread + commission), or 5–7 ticks with 5-digit pricing.