A broker that takes the opposite side of a client's trade, quoting its own bid and ask.
A market-maker broker acts as the counterparty to every trade a client places. When the client buys EUR/USD, the broker is the seller; when the client sells, the broker is the buyer. The broker profits from the spread between its bid and ask prices, and may also manage net exposure by hedging a portion of its client book into the interbank market.
The structural conflict of interest inherent in this model is that the broker technically benefits when clients lose. In practice, regulated market makers are subject to best execution obligations that constrain the most egregious abuses - they must fill at the quoted price, cannot selectively requote to disadvantage clients, and must maintain segregated client funds. The FCA, ASIC, and CySEC all have explicit rules governing market-maker conduct. Nonetheless, the model does create incentive misalignment that does not exist with an ECN or STP broker.
Market makers offer certain genuine advantages: fixed spreads (useful around news events), lower minimum deposits, easier onboarding, and no per-lot commissions. They are often the more practical choice for beginners trading small lot sizes where the commission on an ECN account would represent a disproportionate cost. The key due-diligence question is whether the broker is authorised by a Tier-1 regulator with meaningful enforcement powers, rather than an offshore jurisdiction with nominal oversight.
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