Market Maker vs Ecn broker
Look-alike pair
Full entries: Ecn broker.
A market maker and an ECN broker are two different ways a broker can fill your orders. The single difference that matters is who takes the other side of your trade: a market maker trades against you as principal, while an ECN broker matches your order with other market participants and never takes the opposite side.
Side by side
| Market Maker | Ecn broker | |
|---|---|---|
| Counterparty | The broker itself is the counterparty to your trade. | Other market participants (banks, funds, other traders) are the counterparty. |
| Order execution | The broker fills your order from its own inventory or by hedging elsewhere. | The broker matches your order against resting orders in its venue. |
| Pricing source | The broker sets the bid and ask it quotes to you. | Prices come from the best available orders in the venue. |
| Conflict of interest | The broker can profit when you lose, depending on its hedging policy. | The broker earns from commission or spread, not from your losses. |
| Field mark | Your trade confirmation shows the broker as the counterparty. | Your trade confirmation shows an anonymous counterparty or a venue name. |
| Regulatory status | Rules on disclosure, hedging and capital vary by country and regulator. | Rules on execution, transparency and best execution vary by country and regulator. |
Which word to use
Use market maker when the broker quotes both a bid and an ask and stands ready to trade against you as principal; use ECN broker when the broker operates an electronic venue that matches your orders with those of other participants and does not take the other side.
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