# 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. Source: https://learn.tradelabsai.com/industry/types-of-brokers/ Track: The Trading Industry · Level: Beginner · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Types of Brokers", https://learn.tradelabsai.com/industry/types-of-brokers/ 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)](https://learn.tradelabsai.com/industry/futures-commission-merchants/) | | Prime broker | Hedge funds | Financing, stock lending, clearing. See [Prime Brokerage](https://learn.tradelabsai.com/industry/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?](https://learn.tradelabsai.com/markets/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](https://learn.tradelabsai.com/market-structure/market-makers/) and [Best Execution and Execution Quality](https://learn.tradelabsai.com/orders/best-execution/). **Example: The hidden cost of zero commission** A trader buys 500 shares at the quoted ask of $50.02 through a zero commission broker. The order is filled at $50.015, half a cent better than the quote, which the broker reports as price improvement. Through a direct access broker charging $0.005 per share ($2.50 total), the trader might have placed a limit order at the midpoint, $50.01, and been filled. The difference is small for one trade, but for a very active trader, execution quality, spreads and fees together decide total costs more than the headline commission. See [All-In Trading Cost](https://learn.tradelabsai.com/orders/all-in-trading-cost/). ## 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](https://learn.tradelabsai.com/market-structure/clearing-houses/) | | 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](https://learn.tradelabsai.com/industry/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)](https://learn.tradelabsai.com/industry/futures-commission-merchants/). ## Continue learning - Next lesson: [Futures Commission Merchants (FCM)](https://learn.tradelabsai.com/industry/futures-commission-merchants/) - Previous lesson: [Position Limits and Regulatory Reporting](https://learn.tradelabsai.com/industry/position-limits/) - Related: [Position Limits and Regulatory Reporting](https://learn.tradelabsai.com/industry/position-limits/): Regulators cap some positions and require large holdings to be reported. Learn futures position limits, 13F, 13D and 13G filings and large trader rules. - Related: [How to Choose a Broker](https://learn.tradelabsai.com/industry/how-to-choose-a-broker/): A practical checklist for choosing a broker: regulation, safety of funds, real trading costs, markets, platforms, support and the red flags to watch for. - Related: [Futures Commission Merchants (FCM)](https://learn.tradelabsai.com/industry/futures-commission-merchants/): A futures commission merchant holds customer funds and clears futures trades. Learn how FCMs differ from introducing brokers and how funds are protected. - Related: [Prime Brokerage](https://learn.tradelabsai.com/industry/prime-brokerage/): Prime brokers give hedge funds financing, stock lending, clearing, custody and reporting. Learn the services, how prime brokers earn money and the risks. - Related: [Commissions and Fees](https://learn.tradelabsai.com/orders/commissions-and-fees/): Commissions, exchange, clearing and regulatory fees add up. Learn how commission structures work, the fees hidden in each trade and how to compare brokers. - Related: [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/): Market makers quote prices to buy and sell all day, earning the spread. Learn how they make money, manage risk, why they matter and the myths about them.