The difference between ‘No Dealing Desk’ and ‘market-neutral’
Is a No Dealing Desk broker always market-neutral? What’s the difference between ‘No Dealing Desk’ and ‘market-neutral’?
InterTrader’s position as a 100% market-neutral spread betting and CFD provider is a key part of our mission statement. This unique approach means we can provide clients with fast, fair and transparent trading across thousands of markets.
We are also a No Dealing Desk broker. But what’s the exact relationship between the two terms? In short, one facilitates the other. Here’s how.
NDD vs market makers
As an NDD broker we differ from traditional market-maker brokers in that we don’t have a B book.
The B-book broker will fill your trade internally, keeping it ‘in house’. When you open a position with a B-book broker they will they will take the other side of your trade. They may try to hedge their risk on your trade by offsetting your position with opposite positions held by other clients, but fundamentally they are betting against you. So if you win, the broker loses, and vice versa – a situation that creates a conflict of interest between the broker and its clients.
We avoid this conflict of interest by being market-neutral. And one way we achieve market-neutrality is through NDD execution.
As an NDD broker, whenever you place a trade with us we automatically place a matching trade with our liquidity providers in the real market, with no dealer involvement.
We therefore have no exposure to the performance of the market. The market makers are at ‘market risk’ because their own profit or loss depends on the performance of the market. But our revenue is not influenced by prices going up or down. It is generated from our volume of client trades. So our only concern is to provide clients with the best possible service to support their trading. Unlike market makers we are essentially always on the same side as our clients and our goals are aligned.
There’s another benefit to NDD execution. It means your trades are executed with no re-quoting of prices. We can execute your trade at the price you are quoted because orders rely on market liquidity and not on the discretion of a dealing desk.
Direct market access
So, being an NDD broker helps us to remain market-neutral. However, there are other ways to achieve market-neutrality. One of these is through direct market access (DMA) trading on shares. This is when a broker allows traders to place buy and sell orders directly into the order books of equity exchanges.
We offer DMA access to shares via our premium service, Sigma Trading. This gives eligible clients the ability to trade shares directly on UK, US and European exchanges, even placing orders inside the market spread.
Just like with NDD, with DMA we achieve market-neutrality by carrying no risk on your trades. However, with DMA the trade passes straight through to the underlying market without staying on our books at all.
Thanks to our NDD and DMA platforms our clients avoid the conflict of interest that exists in the traditional market-making broker 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.