ECN, STP and market maker: how your broker actually makes money
Three execution models, one question that matters — does the broker profit when you lose? And why the label on the account page rarely settles it.
Every broker advertises tight spreads. Far fewer explain what happens to your order after you click, and that is where the money is actually made — or taken.
There are three models. The difference between them comes down to one question: is the broker on the other side of your trade?
Market maker (dealing desk, B-book)
The broker creates its own market and takes the opposite side of your position. You buy, it sells to you from its own book. If you lose, that loss is its revenue.
This model allows fixed spreads and instant execution on any size, which is why it is common on beginner-facing accounts. But the conflict is structural and unavoidable: your loss is the broker’s gain.
That does not make every market maker dishonest; many are regulated, hedge their net exposure and behave properly. It does mean the incentive runs against you, and you should know it exists rather than discover it later.
STP (straight through processing, A-book)
Orders are passed to liquidity providers with no dealing desk deciding whether to fill them internally. The broker adds a small markup to the raw spread, typically 0.2 to 1 pip, and that markup is its revenue.
The broker is not your counterparty, so it does not profit from your losses. It profits from your volume.
ECN (electronic communications network)
Your order enters a network where it can match against banks, funds, non-bank market makers and other traders. The broker charges a commission per lot rather than marking up the spread, so raw spreads can approach zero on liquid pairs during liquid hours.
Like STP, this is A-book: revenue comes from commission, not from your losses.
The comparison that matters
| Market maker | STP | ECN | |
|---|---|---|---|
| Broker is your counterparty | yes | no | no |
| Revenue from | your losses, spread | spread markup | commission |
| Spreads | fixed, wider | variable, small markup | raw, near zero on majors |
| Extra commission | usually none | usually none | yes, per lot |
| Conflict of interest | structural | limited | limited |
Raw spreads plus commission is not automatically cheaper. An ECN account showing 0.1 pips with $7 per lot round-turn can cost more than an STP account at 1.2 pips with no commission, depending on how much you trade and in what size. Compare the total, not the headline.
Why the label on the website settles nothing
Nothing stops a broker from calling an account “ECN”. The term is not defined in regulation and not enforced by anyone, and hybrid setups are the norm rather than the exception: many firms A-book clients who trade profitably and B-book the rest, switching per client or per trade without telling anyone.
What is checkable:
- Is there a separate commission? Genuine ECN pricing charges one. An account advertising “ECN, zero commission” is marking up the spread, which is STP pricing with an ECN label.
- Are spreads variable? Fixed spreads mean someone is taking the other side.
- Does the broker publish execution statistics? Slippage and rejection data, with dates. Most do not; the ones that do are making a checkable claim.
- Which entity holds your account? Execution policy is set per entity, and an offshore arm may run a different model from the regulated one under the same brand.
We check these rather than the label, and where a broker declines to state its model we record that too; see the methodology.
Sources
- B2Broker — ECN vs STP brokers
- ECN Execution — ECN vs STP vs market makers vs DMA
- Pandats — Understanding ECN, STP and market makers