Forex Brokerage Firms
There are many money transfer options when sending money overseas to suite your requirements. One increasingly popular method is to use forex brokerage firms, also known as FX brokers, particularly for sending large amounts of money internationally, whether for purchasing a property or importing for a business, for example. Because they specialize in tailored solutions based on the clients' needs, they are the core group of companies you will find on FXcompared.
Today we will focus on foreign brokerage firms (FX brokers), specifically on what they are and do.
What is a FX brokerage firm?
Known as foreign exchange brokers, these non-bank companies specialize in offering currency exchange and high value international money transfers for both individuals and companies.
On a simple search on the Internet you will find many types of forex brokers, some terms better explained, others not so much. It can be daunting to take every website and read every article on the subject, hoping to find the right answer.
However, broadly speaking, there are two main categories:
- Dealing Desk Forex Brokers
- No Dealing Desk Forex Brokers
The first category includes Market Maker brokers (MM), while the second covers Electronic Communication Network (ECN) and Straight Through Processing (STP) brokers.
Let´s take them one by one:
Market Maker brokers, also known as MM brokers are directly connected to the market compared to other forex brokers. They offer fixed spreads – the difference between the buying and selling price of a currency – and high liquidity. These operations are at the heart of the international forex market. They can either be institutional, dealing in huge trades with banks and other financial institutions, or retail, offering trading services to individuals. They make money through the spread.
Electronic Communication Network (ECN) forex brokers operate directly on the interbank market. They offer you the best spreads and prices transparency.
You can place an order anonymously and, unlike MMs, they don´t trade against you. They make money only from trading fees (commission), so do not have an interest in whether you make or lose money on your trade. Spreads can vary depending on trading volumes in the market, which is a downside.
Straight Through Processing (STP) brokers are an intermediary between their clients and liquidity providers, be they banks or other brokers). They offer both fixed and variable spreads and, just like ECN brokers, they don´t trade against their clients. They make money by adding a markup to the spread quote. This category covers companies that specialise in making foreign currency transfers where the money will actually be used, such as in the purchase of a property, rather than for people looking to make money through trading currencies.
If you are starting out on looking for ways to compare money transfer providers and compare foreign exchange rates and forex brokers, the best option is to choose a comparison website such as FXcompared.com.
Comparing providers from all over the world brings you lower costs and fees, best prices and trust, as the providers are vetted by the comparison website to ensure that they are fully regulated.
You don´t have the time to check every forex brokerage firm you want to work with. So to have a third party do that for you: to make sure they meet all legal and financial regulations, funds security and laws in force, gives you the most efficient way to transfer your money abroad with full peace of mind.