Dealing Desk Model

In securities trading, the dealing desk model is a brokerage model in which the broker acts as the counterparty to trades ordered by investors. This allows investors to buy and sell assets even when no other investors are willing to buy from or sell to them. By promising to buy assets at a given price and sell assets at a (higher) price at any time, the dealing desk effectively takes the opposite position in a trade.

Example: A forex trader wants to buy 10,000 Swiss francs. Instead of waiting until another trader is willing to sell 10,000 francs – as would be necessary if the no dealing desk model were used – he is able to purchase the 10,000 francs from his broker’s dealing desk immediately. If he wants to sell his Swiss francs at a later time, he can sell them directly to his broker at the going rate.

The dealing desk model is most commonly used in forex trading, though it is also used by CFD brokers, among others. Dealing desks may carry out a large portion of trades (or all trades) within their own liquidity pool, without brokering trades between individual investors at all.

As counterparty to investments made by their clients, brokers who use the dealing desk model stand to gain if the value of assets falls after they have sold them to investors and investors sell those assets back to them at a lower price. They also stand to lose if rates climb and investors sell assets back at a price higher than the one they paid when they purchased the assets.

See also: No dealing desk model

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.