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How does a dealing desk work?

A dealing desk is usually found within a financial institution or big bank. It’s the place where dealers execute trades.

Since the forex market is essentially open around the clock on most weekdays, many financial institutions will have various dealing desks located around the world to take advantage of the time differences.

Dealing desks are not exclusive to foreign exchange, either. Although forex is the largest market, banks and finance companies will also use dealing desks to trade equities, commodities and other financial assets.

Large financial institutions concerned with high-volume trade will usually have whole dealing facilities or departments staffed by hundreds of dealers at multiple desks. Therefore, the dealing desk can actually be an exceptionally large department.

Any big organisation that deals with major currencies could have several trading desks staffed by dozens of specialist workers trading in very particular currencies all day.

What is a ‘dealing desk broker’?

A dealing desk broker – also known as a ‘market maker’ – will take trades from its clients without necessarily trading in the underlying market itself. They will offer a quote based on the underlying market price, and then sit on the other side of the client’s trade.

When a dealing desk broker accepts a trade, they may or may not trade in the underlying market to cover their exposure. They may also offset this exposure with other clients’ opposing trades that are similarly kept ‘in house’.

This practice of keeping trades in house is known as running a ‘B book’, and it enables dealing desk brokers to keep all of the profit on its clients’ losing trades.

What does ‘no dealing desk’ mean?

When a company says it has a ‘no dealing desk policy’ it means that it provides trading with immediate execution in the underlying market.

This is different from trading through a dealing desk, where the broker is likely to remain on the other side of your trade. With the ‘no dealing desk’ model, the broker offsets its exposure on its clients’ trades by matching each trade in full in the underlying market.

When there is no dealing desk, the company might only profit from the dealing spread per trade. They will have no financial interest in whether your trade makes or loses money.

You will have access to a high-liquidity pool full of competitive bid and ask prices, and you will know that – whatever position you take – your broker is not taking a position against you.

This is why, when choosing a broker, it’s important to check whether they adopt a dealing desk or a no dealing desk model.

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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