Types of Brokers: Full Service, Discount, ECN and More

Types of Brokers

Brokers range from full service firms to discount apps, ECN and market maker brokers. Learn how each type works, how they make money and which suits which trader.

Beginner3 min readUpdated 3 Oct 2026

Lesson 10 of 44

A broker is the firm that connects you to the markets: it accepts your orders, routes or fills them, holds your money and positions, and reports your results. Brokers differ widely in what they offer, how they execute orders and how they earn money. Knowing the type of broker you use helps you understand your real costs, potential conflicts of interest and what protections apply.

Main broker types#

Type	Who it serves	How it typically earns money
Full service broker	Wealthy individuals, institutions	Advice fees, commissions, asset based fees
Discount and online broker	Self directed retail traders	Low or zero commissions, payment for order flow, interest on cash, margin lending
Direct access or ECN broker	Active traders wanting routing control	Per share or per contract commissions, data fees
Market maker (dealing desk) broker	Retail forex and CFD traders	Spreads, and sometimes client losses when it takes the other side
STP or ECN forex broker	Forex traders	Commissions or marked up spreads, passing orders to liquidity providers
Futures commission merchant	Futures traders	Commissions, interest on margin. See Futures Commission Merchants (FCM)
Prime broker	Hedge funds	Financing, stock lending, clearing. See Prime Brokerage
Crypto exchange	Crypto traders	Trading fees, spreads, listing and other services

Agency versus principal#

Model	Meaning	Conflict of interest
Agency	The broker routes your order to the market as your agent	Lower; earns commission
Principal (dealer)	The broker trades against you from its own account	Higher; it can profit when you lose

Many retail CFD and forex brokers act as principal for some or all client trades, managing their net exposure. Regulators require disclosure and fair pricing. See What Is a CFD?.

Zero commission and payment for order flow#

Many US stock brokers charge no commission. They earn money in other ways, notably payment for order flow (PFOF), where market makers pay brokers to receive retail orders, plus interest on client cash and margin loans. Market makers can profit from retail flow because it is less likely to be informed. Supporters say retail traders often get prices at or slightly better than the best public quote; critics point to conflicts of interest. PFOF is banned in the UK and is being phased out in the EU. See Market Makers and Liquidity Providers and Best Execution and Execution Quality.

Client protections#

Protection	Applies to
SIPC (US)	Securities and cash at failed broker dealers, up to $500,000 including $250,000 cash; not market losses
Segregation of customer funds	Futures and many regulated brokers. See Clearing Houses and Central Counterparties
FSCS (UK)	Eligible investments up to £85,000 per person per firm
Negative balance protection	Required for retail CFD clients in the EU and UK
Crypto exchanges	Often no equivalent protection

Choosing the right type#

If you	Consider
Want advice and planning	Full service or advisory firm
Invest long term in stocks and ETFs	Low cost online broker
Day trade with precise routing	Direct access broker
Trade futures	Futures broker (FCM or introducing broker)
Trade forex	Regulated ECN or STP broker; check regulation carefully

See How to Choose a Broker.

Frequently asked questions#

What are the main types of brokers?#

Full service, discount and online, direct access, market maker or dealing desk, futures brokers, prime brokers and crypto exchanges.

What is a dealing desk broker?#

A broker that takes the other side of client trades, acting as principal, rather than passing orders to an external market.

How do zero commission brokers make money?#

Through payment for order flow, interest on client cash, margin lending, securities lending and other services.

Next, learn how futures brokers work in Futures Commission Merchants (FCM).

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Next lessonFutures Commission Merchants (FCM)A futures commission merchant holds customer funds and clears futures trades. Learn how FCMs differ from introducing brokers and how funds are protected.