MM (Market Maker)
DD/MM Dealing Desk Brokers ( or Market Maker):
Act as a counterparty for client transactions
- Route orders through Dealing Desks
- “Make the market” and trade against clients. (They take the opposite side of the trade. When traders want to sell, they buy from them, when traders want to buy, they sell to them)
- Dealing desk brokers are able to profile their clients. They divide clients into groups systematically with algorithm. (Usually called “A Book”, “B Book”)
- “A Book” Automation for losing clients: Broker automatically take the other side. Losing trades of clients are counter-traded and become brokers’ profit. More losing traders means more profit for the broker.
- “B Book” Automation for winning clients: Broker automatically take the other side and then hedge the position in the real market that they have access to. (e.g. When traders buy , broker sell to them, then the broker buy the same amount in real market). This is also done automatically through algorithm. In this case, brokers will also make money (through spread or commission).