Traders often denigrate market makers。Stop-loss hunters, price manipulators, money thieves; all these negative labels are blamed on market-maker brokers。However, many of the opinions circulating among traders about market maker brokers are inaccurate and even completely misleading。

In fact, market makers aren't always the bad guys。Market makers include a variety of broker types, and a non-processing platform broker is just one of them。The key is to check the broker's regulations and credibility beforehand。Therefore, this article will discuss three important facts about market maker brokers。

There is a processing platform broker - market maker.？

The term broker is often used interchangeably with market maker.。However, this is not entirely true。Market makers are parties that provide liquidity and buy and sell quotes。They can be individuals, brokers, banks, hedge funds and other financial firms。Large banks, especially the main market makers。

A simple example of a market maker's practice is foreign exchange trading at a local bank.。This is very similar to the business activities of market makers in forex trading。Let's look at the following example。

Dolan needs dollars to travel to the United States。He carried the local currency euro to Z bank to exchange dollars。In this case, Dolan wants to buy dollars, and Bank Z makes a market by selling dollars to buy euros。

A month later, Dolan returned home and wanted to convert the remaining dollars into euros.。He came to Bank Z again, and this time Bank Z made a market by buying dollars and selling euros.。Here, Bank Z profits from the difference between the sell rate and the buy rate。

In the area of forex trading, liquidity providers and major brokers use a similar model。Obviously, their business is much larger than retail brokers。In short, market makers include a variety of market participants, and a broker with a processing platform is just one of them.。

Must a market maker be a liar?？

If market makers, unregulated brokers and offshore brokers are prone to fraud, why are there so many traders signing up with them？Here's the Next Misunderstanding of Market Maker Brokers。In fact, forex traders choose brokers based on demand rather than prestige.。

If traders put the safety of their funds first, then they register with a highly regulated forex broker with multiple licenses issued by top regulators。Traders sign up for ECN brokers if they need precise execution and low spreads。

But what if the trader has barely enough money？They will look for brokers that offer high leverage and low margin。Alternatively, the trader is seeking large bonuses, rebates or free funds as trading funds。For this type of trader, market maker brokers, unregulated brokers and offshore brokers are their best options。

Did you know that OANDA, which is known for its high credibility in the US, UK and Canada, also uses the market maker model?？Yes, as pioneers of nanohand size in forex trading, they proudly declare themselves market makers。

This is what ECN brokers cannot offer。However, we cannot compare this US-licensed broker to fraudulent brokers such as MFX Broker, even though both execute trade orders as counterparties.。

Market maker brokers are often portrayed negatively as brokers who deliberately profit from a trader's losses。However, many retail forex brokers acting as market makers are licensed by the US NFA / CTFC, UK FCA, ASIC Australia and other well-known regulators, so they must comply with the market maker rules and laws set by the regulators.。

On the other hand, market maker brokers with offshore licenses or without any regulations are more likely to engage in improper business activities。Some may be trustworthy, some suspect。

Market makers are worse than ECN？

From the above discussion, you can understand that not all market maker brokers are evil。We can immediately judge the quality of forex brokers based on their regulatory status。The higher the reputation of the regulator, the better the credibility of the broker。However, a broker's market maker, STP or ECN classification cannot be used as a measure of its quality。

Most forex brokers are hybrids, offering both market maker, STP and ECN conditions。Even if a broker implements the STP / ECN model, its liquidity provider is still a market maker。So there's nothing wrong with saying that all forex brokers are basically "market makers."。Therefore, we cannot judge the quality of the broker based on this label。

If you do not want to fall victim to scams, avoid using unregulated brokers。Almost all unregulated brokers are scammers.。Traders who become their customers will lose money sooner or later。If you do make a profit with them, leave immediately and withdraw all funds before the broker closes its business。

What about overseas brokers?？We can estimate that 50% of them are trustworthy, but the other 50% are no different from unregulated brokers。Regulated brokers, on the other hand, are more credible, but some of them do exploit regulatory loopholes。

What is a "good" market maker?？

To trade safely at a market maker, you should ensure that they are regulated and have a large customer base。Even better if the broker is trustworthy in executing millions of trades and continues to earn substantial revenue each year, indicating its financial success。

There are many brokerage firms that meet the above criteria, but the names of these firms are usually the most popular (if not the best):

◇ Exness: famous for instant withdrawals and the huge increase in transaction volume in recent years。

FBS: Probably the most flexible company in the industry offering trading conditions, trusted by millions of traders。

◇ eToro: hybrid market maker broker, known for providing the world's most widely recognized social trading platform。

AvaTrade: More than 400,000 customers worldwide, with a monthly transaction volume of 2 million。

◇ XM: The company has the ability to attract more than 5 million customers worldwide and execute a staggering 2.4 billion transactions.。

◇ CMC Markets: Recognized as the Top Market Maker Broker for Forex Trading, Created 4 in 2021.A staggering £61.3 billion in revenue。

◇ Interactive Brokers: the market maker of choice for professional traders。

◇ IG: Parent company records annual revenue in 2021 8.£6.3bn, with a market value of £2.9bn。

Finally

Regardless of the broker's operating model, they may and will engage in fraudulent activities.。This phenomenon is not unique to market model brokers.。For example, a broker may call itself a processing-free platform。It turns out that the broker and its liquidity provider are actually owned by the same person。This program enables the aforementioned brokers to actively trade with you without your knowledge.。

In short, market makers can conclude from this infographic。

It is not wise to judge the quality of a broker by its type alone。Therefore, no matter what type of broker you are going to sign up for, we strongly recommend that you first study its performance record and view its reviews。