Inside Pepperstone: Pricing without the Dealing Desk

How does a trader know whether they’re actually getting a fair outcome from their broker?

In Forex and CFDs, there are typically two types of Brokers: Dealing Desks and Non Dealing Desk brokers. Let’s examine the difference.

Dealing Desks (DD) vs. Non Dealing Desks (NDDs)

Dealing desk brokers are also known as Market Makers in the traditional sense, they’re often some of the biggest brokers in the market. Whilst this model offers great liquidity, in the majority of markets, it is also important to note that they create their own price. How this price is made comprises many factors including client demand and supply. These desks often make trades on behalf of the company itself as well (or undertake what is called proprietary trading). They can basically engage in speculative trading on the market on behalf of the company.

Non-dealing desk brokers on the other hand, source and aggregate the best buy and sell price from one or more third party liquidity providers with the best available price passed directly onto clients. Pepperstone ensures it always has a number of high quality, independent liquidity partners to choose from in order to source top pricing for our clients. Non-dealing brokers also don’t make speculative company trades with a view to make money, the only trades placed are to manage the internal market risk exposure.

The benefits of Pepperstone’s approach

Although Pepperstone in certain jurisdictions has higher scope permissions (including market making) there’s a good reason Pepperstone uses the non-dealing desk approach.

We believe it offers a more transparent price, which is really important for traders. We pass on the rates from a range of independent Liquidity Providers to secure the best prices and tight spreads. This can help reduce the chance of re-quotes.

More importantly, as Pepperstone is using multiple independent third parties to source our prices, we don’t provide personal advice to influence how our customers trade and we don’t make speculative trades on behalf of the company. We have no direct interest in how our clients decide to trade or how the markets move. We just focus on trying to get you a stable price that best reflects the up-to-date underlying market conditions.

Learn more about trading CFDS

Here at Pepperstone, our customers love the product range along with the low cost to trade and the fact so many markets are open around the clock. Interested? Watch the more videos to learn or speak to our team about whether CFDs are right for you.