NDD, STP and ECN in Overseas FX: Differences from DD and How to Tell Them Apart
Are there too many execution terms such as NDD, STP and ECN, leaving you unsure which to choose?
In short, an execution model describes how an order is handled. It does not mean NDD is always better.
This article sorts out how each model works and how to tell them apart. By the end, you will know how to read a broker's labels and what to compare.
In short: execution models are differences in mechanism, not a ranking
- Execution models split broadly into DD and NDD, and NDD includes STP and ECN
- NDD generally means the broker passes orders to outside providers instead of taking them on itself
- Labels are self-declared by the broker, and the model may differ by account type
- Compare by real cost (spread plus commission) and execution quality
The big picture of DD and NDD models
DD stands for Dealing Desk and NDD for No Dealing Desk. The difference is whether the broker takes the order itself and acts as your counterparty, or passes it on to outside providers.
NDD includes the STP and ECN models. Both pass orders to outside providers, but they tend to differ in how prices are gathered and how fees are charged.
| Type | Meaning | In a phrase |
|---|---|---|
| DD model | The broker takes the order itself and acts as your counterparty | The broker is both the window and the counterparty |
| NDD model | The broker passes the order outside. Includes STP and ECN | The broker acts as a go-between |
| STP model | Within NDD, the order goes directly to a provider | Go-between type |
| ECN model | Within NDD, the order goes to a market where participants' orders gather | Direct-to-market type |
Comparing how DD, STP and ECN work and what sets them apart
Each model differs in order flow and source of revenue. That is why the tendencies in spread and commission also differ.
| Model | Order flow | General source of revenue | Cost tendency |
|---|---|---|---|
| DD | The broker takes it itself | Spread, and the profit or loss from trading against clients | Often no commission, with costs built into the spread |
| STP | Passed directly to a provider | The markup added to the spread | Often a wider spread with no commission |
| ECN | Passed to the market | A commission on each trade | Often a tighter spread with a separate commission |
What the difference in revenue sources means
With DD, it is pointed out that clients' profit and loss are tied to the broker's revenue. With NDD, spread and commission are generally the main revenue.
Actual operations differ by broker, though. An explanation of the mechanism alone cannot tell you the quality of execution.
Why "NDD is always better" is not true
The term NDD sounds appealing, but it does not mean trading conditions are good by itself. Before you decide, there are points worth checking.
- Labels are self-declared by the broker, and not always verified by a third party
- The model may differ by account type, and some instruments may be handled differently
- Even with NDD, slippage occurs when provider liquidity is thin
- Even a tight spread can change the total cost if a commission is charged separately
- ECN is not necessarily better for execution, and you need to compare including the commission
How to tell the models apart and what to check
When you read a broker's labels, it is important not to decide on the execution model name alone. Checking the following items on the official page makes the judgment easier.
- The commission structure by account type (whether a round-turn commission applies, and the unit it is shown in)
- Whether the execution model is stated, and whether it is explained separately by account type
- How slippage and requotes are explained
- What is disclosed about registration with regulators and licenses
- The terms on when order rejection or cancellation can occur
As a rule, compare numbers at the same time of day and for the same currency pair. Figures fluctuate, so check the latest figures on the official page.
Fit with scalping and EAs
Short-term trading is a style in which the cost of each trade strongly affects results. Check execution speed and any restrictions in the terms, not just the model name.
| Style | What to focus on | What to check |
|---|---|---|
| Scalping | Total cost, speed and stability of execution | Whether scalping is allowed, and limits on order interval or holding time |
| EA (automated trading) | Reproducibility of execution, connection stability | Whether EAs are allowed, and limits on trading frequency or number of orders |
| Mid- to long-term trading | Swap, margin headroom | The execution model matters less. Check costs and operating rules |
How execution models relate to cashback
Many cashback systems calculate returns based on trading volume. In general, the execution model itself has no direct bearing on returns.
Return amounts are not yet confirmed, and we will post them on each broker's page at launch. Eligible account types and conditions also differ by broker.
Compare by real cost
Real cost = spread + commission − cashback. Comparing by this total rather than by execution model name makes your judgment less likely to waver.
You can try the calculation with the trading cost comparison tool. Use hypothetical values for conditions, and check actual figures on the official page.
Enter spreads and commissions to estimate the real cost by broker. Replace the figures with the latest information from the official pages.
Compare trading costsFAQ
Q.What is the difference between the NDD and DD models?
With the DD model, the broker takes your order itself and acts as your counterparty. With the NDD model, the order is passed outside. Which is better depends on conditions and execution quality taken together.
Q.What is the difference between STP and ECN?
Both are types of NDD. Generally, STP is a go-between type that passes orders directly to a provider, while ECN passes them to a market where participants' orders gather. They also tend to charge fees differently.
Q.Can I assume NDD means better execution?
Not necessarily. Even with NDD, slippage occurs when liquidity is thin. Rather than the model name, check the conditions on the official page and actual execution results.
Q.Does the execution model affect cashback?
Many cashback systems depend on trading volume, and the model itself has no direct bearing. Return amounts are not yet confirmed, and we will post them on each broker's page at launch. We recommend comparing by real cost.
This article is for information purposes only and is not investment advice. Conditions may change, so please check each broker's official page for the latest information. Offshore FX and CFD trading carries a risk of losses exceeding your principal.
