Make Sure to Do Broker-Dealer Due Diligence
Retail brokers can be divided into market makers (dealers) and ECNs (electronic communications networks). ECN is the way the true Interbank market operates. ECN brokers can have from one to a dozen liquidity providers. Market makers now also speak in terms of liquidity providers to avoid the stigma of the market-maker moniker. Each approach has advantages and disadvantages. Most retailers are still market makers, but more and more are venturing into the ECN world. The Big Three (see further on) now offer a market-maker venue to small traders and an ECN venue for their larger and institutional clients.