What Is a Market Maker in Forex (Australia, 2026)

Summary, broker models for Australian traders

The summary:

• A market maker broker takes the other side of client trades and profits from the spread, mark-up, and (in the B-book model) client losses
• An ECN/STP broker passes orders straight through to liquidity providers and profits from commission and the broker mark-up on raw spreads
• A hybrid broker (most large AU names) runs an A-book / B-book split, internalising small or losing flows and routing larger or winning flows to liquidity providers
• AU pure market makers: Plus500, eToro, easyMarkets, Trade Nation (markup-pricing models)
• AU pure ECN/STP: IC Markets, Pepperstone (Razor), FP Markets, Fusion Markets, Eightcap RAW, Global Prime
• AU hybrids: CMC Markets, IG Markets, Vantage, AvaTrade, OANDA, ThinkMarkets
• ASIC permits the market maker model. The conflict of interest is addressed through the Product Intervention Order, PDS disclosure, and best execution obligations under the Corporations Act

The market maker model isn’t inherently bad. It’s a different commercial structure with different incentives, transparently regulated by ASIC.

How a market maker actually works

A market maker quotes a two-sided price (bid and ask) and stands ready to take either side of the trade. When you click buy on EUR/USD, the broker sells you EUR/USD from its own book. When you click sell, the broker buys it from you.

The broker’s profit on the trade comes from three sources:

1. The spread between bid and ask
2. Any mark-up the broker adds above the underlying interbank price
3. The net P&L on the broker’s open position, if it doesn’t immediately hedge

The third source is where the controversy lives. If the broker doesn’t hedge the position with a liquidity provider, the broker’s P&L is the inverse of the client’s P&L. You lose, the broker wins. You win, the broker loses. That’s the “B-book” arrangement, and it sets up a structural conflict of interest.

In practice, modern market makers manage that conflict through net-position hedging. The broker doesn’t care about any one client’s P&L. It cares about the aggregate exposure across all clients and hedges the residual into the interbank market. Individual client outcomes wash out in the aggregate.

Why the market maker model exists

Three reasons it persists despite the conflict-of-interest optics:

• Cost efficiency at small lot sizes. Routing a 0.01 lot order to an interbank liquidity provider is uneconomic. The market maker absorbs the order on its own book and saves the cost.
• Tight spreads on liquid pairs. A market maker with sufficient flow can quote tighter spreads than the underlying interbank market because it’s averaging across thousands of small orders.
• Instant execution. There’s no third-party liquidity provider in the chain, so fills are deterministic. ECN brokers can have variable slippage on larger orders.

For retail-sized trades on liquid majors, the market maker model is often the cleaner experience. The trade-off is the conflict of interest, which is what regulation manages.

A-book vs B-book vs hybrid

A-book (STP / DMA / ECN models)

The broker passes the client order through to a liquidity provider (banks, prime brokers, or an aggregated liquidity pool). The broker’s profit is the commission and any mark-up on the raw spread. The broker has no position. Client profit and broker profit aren’t directly correlated.

A-book models you’ll see in Australia:

• STP (Straight Through Processing), order passed to a single liquidity provider
• DMA (Direct Market Access), order placed directly into the underlying market (more common in equity than forex)
• ECN (Electronic Communications Network), order matched against a pool of liquidity providers and other clients

For practical retail purposes, ECN and STP are functionally similar. The order isn’t internalised by the broker.

B-book (the pure market maker model)

The broker takes the other side of the trade and keeps it on the broker’s book. No external hedge. The broker’s P&L is the inverse of the client’s P&L. This is the historic “bucket shop” model. ASIC permits it but requires extensive disclosure.

In modern AU practice, no large broker runs pure B-book on every order. Even brokers that primarily market-make (Plus500, easyMarkets) hedge net residual exposure into the interbank market.

Hybrid (A-book / B-book split)

This is what most large AU brokers actually do, even if their marketing language varies. The broker internally segments client flow:

• Profitable, sophisticated, or large clients, routed A-book to liquidity providers, because the broker doesn’t want to take the other side
• Smaller, less sophisticated, losing clients, kept on the B-book, because aggregated retail flow is a positive expected-value position for the broker

The split is dynamic and based on the broker’s internal flow analysis. It’s also disclosed in the PDS, sometimes in language that requires reading between the lines.

Australian broker model classifications

The model classifications below reflect the dominant operating mode at each broker. Most large names run hybrid splits, and the line between “primarily market maker” and “primarily ECN/STP” is sometimes thin.

Pure / primary market maker brokers (AU)

Broker	Model	Pricing
Plus500	Pure market maker	Spread-only, no commission
eToro	Pure market maker	Spread-only, no commission on forex
easyMarkets	Pure market maker	Spread-only, GSLO baked into spread
Trade Nation	Market maker (fixed spread)	Fixed spread, no commission

These brokers profit primarily from the spread and the broker’s net P&L on internalised positions. None advertise commission-based ECN access. The PDS at each is explicit that the broker is the counterparty to client trades.

Pure / primary ECN/STP brokers (AU)

Broker	Model	Pricing
IC Markets	ECN (cTrader, MT4/MT5 Raw)	Raw spreads + AUD 7 commission per round-turn lot
Pepperstone	ECN (Razor account)	Raw spreads + AUD 7 commission per round-turn lot
FP Markets	ECN (Raw account)	Raw spreads + AUD 6 commission per round-turn lot
Fusion Markets	STP (Zero account)	Raw spreads + AUD 4.50 commission per round-turn lot
Eightcap	ECN (Raw account)	Raw spreads + AUD 7 commission per round-turn lot
Global Prime	STP / NDD	Raw spreads + commission

These are the AU brokers that built their commercial proposition on no-dealing-desk execution. The Standard accounts at most of these brokers (no commission, wider spread) are usually B-book; the Raw / ECN accounts (raw spread, commission) are A-book to liquidity providers.

Hybrid AU brokers

Broker	Model	Notes
CMC Markets	Hybrid (Next Generation)	A-book and internalisation; PDS discloses model
IG Markets	Hybrid	A-book/B-book split disclosed in PDS
Vantage	Hybrid	RAW and Standard accounts route differently
AvaTrade	Hybrid	Market maker pricing on most retail accounts
OANDA	Hybrid	Mixed model with proprietary liquidity
ThinkMarkets	Hybrid	Standard/RAW split

For most retail traders the hybrid model is what they’re actually trading on, regardless of the broker’s marketing language.

The conflict of interest, and how ASIC manages it

The headline concern with market making is that the broker profits when the client loses. ASIC has been alive to this since the early 2000s and has built a regulatory framework around it.

The Product Intervention Order

ASIC’s Product Intervention Order (in force since 29 March 2021, made permanent) addresses the most damaging consequences of the market-maker model directly:

• 30:1 retail leverage cap on major forex pairs reduces the magnitude of catastrophic losses
• 20:1, 10:1, 5:1, 2:1 caps on minors, commodities, shares, and crypto respectively
• 50% margin close-out prevents accounts drifting to zero (and therefore to the broker)
• Mandatory negative balance protection caps the trader’s downside at zero
• Standardised retail risk warning showing the broker’s actual percentage of retail accounts losing money

The risk warning percentage is the most pointed disclosure. Every CFD broker website in Australia has to display it. Numbers are usually in the 70% to 80% range. That’s transparent disclosure of the headline reality of retail CFD trading.

Product Disclosure Statement (PDS) requirements

ASIC requires every CFD provider to publish a Product Disclosure Statement (PDS) and a Target Market Determination (TMD). The PDS must disclose, among other things:

• Whether the broker acts as principal (counterparty) or agent
• How the broker’s revenue is generated
• The conflict of interest the broker faces
• Best execution policy
• Order routing and execution venues
• Risks of the product

Reading the broker’s PDS is the most reliable way to understand the broker’s commercial model. The marketing copy on the broker’s home page is sometimes ambiguous. The PDS is legally required to be specific.

Best execution obligations

Under the Corporations Act and ASIC’s Regulatory Guide 265 on best execution, an Australian broker must take reasonable steps to obtain the best outcome for the client given the order’s characteristics. Best outcome is usually price, but also includes speed, likelihood of execution, and total cost.

The best execution obligation applies regardless of whether the broker is acting as principal or agent. A market maker can be principal to the trade and still meet best execution by quoting fair prices and not deliberately filling at worse-than-market levels.

AFCA dispute resolution

If a client believes the broker has acted unfairly (slippage well outside market norms, requote patterns, deliberate stop-hunting), the Australian Financial Complaints Authority (AFCA) is the no-cost external dispute resolution scheme. Every ASIC-regulated broker must be an AFCA member. Determinations are binding on the broker up to a defined monetary limit.

How to tell which model your broker uses

Three reliable methods:

Read the PDS

Every ASIC-regulated broker publishes a Product Disclosure Statement on the website (usually in the footer under “Legal” or “Documents”). Look for the section on the broker’s role:

• “We act as principal to your trades”, market maker (the broker is the counterparty)
• “We act as agent for your trades”, STP (the broker passes orders through)
• Mixed language about routing some orders to liquidity providers and internalising others, hybrid

Check the account types

Brokers offering separate “Standard” (no commission, wider spread) and “Raw / ECN / Pro” (raw spread, commission) accounts are typically running:

• B-book on the Standard account (broader spread is the broker’s mark-up plus internalisation profit)
• A-book on the Raw / ECN account (commission is the broker’s revenue, spread passes to LPs)

Brokers offering only one account type with no commission and no raw alternative are typically pure market makers (Plus500, eToro, easyMarkets, Trade Nation).

Check the account statement language

Once you’ve opened a live account, the trade confirmation language is sometimes a giveaway:

• “Counterparty: [Broker entity]”, market maker
• “Counterparty: [Liquidity provider]” or LP-specific tickers, STP/ECN
• Counterparty varies by trade, hybrid

Pros and cons of each model

Market maker pros and cons

Pros:

• Tighter spreads on liquid majors at small position sizes
• Instant execution, no third-party liquidity hops
• Lower or no commission on retail-sized accounts
• Useful for clients trading micro lots where ECN routing is uneconomic

Cons:

• Structural conflict of interest (broker profits when client loses, in B-book scenarios)
• Slippage and requote patterns can be opaque
• Less suitable for high-frequency or large position-size strategies

ECN/STP pros and cons

Pros:

• No structural conflict of interest on the routed flow
• Genuine raw spreads on liquid majors (often 0.0 to 0.2 pips on EUR/USD)
• Better suited for scalping, EAs, and large position sizes
• More transparent execution model

Cons:

• Commission per trade adds up on small sizes
• Variable slippage on larger orders or thin liquidity windows
• Standard (non-raw) accounts at the same broker often run B-book under the hood

For most AU retail traders trading small lot sizes on majors, the difference between models in net trading cost is small. For active scalpers, EA users, or larger-position traders, the ECN model’s advantages typically outweigh the commission cost.