A forex broker (also known as a retail foreign exchange broker or currency trading broker) is a financial services firm that provides traders with access to a transaction platform for buying and selling foreign currencies. Individual participants often lack the capital to trade directly on the interbank market; forex brokers act as intermediaries between these retail traders and the Interbank foreign exchange market.[1]
The retail forex brokerage industry emerged following the collapse of the Bretton Woods system in 1971, which transitioned the global economy to a floating exchange rate system. For several decades, trading remained primarily the domain of interbank players.
The industry expanded in the mid-1990s with the advent of the internet and electronic communication networks (ECNs). In 1996, the first online retail platforms were launched, allowing individual investors to trade with smaller position sizes. As of 2026, the market has evolved to include tokenized fiat currencies and stablecoin integration, allowing for 24/7 settlement outside of traditional banking hours.[2]
Business models
Forex brokers are categorized by how they handle client orders, which dictates their transparency and potential conflicts of interest:
Market Makers (Dealing Desk): These brokers act as the counterparty to the trader. They set the bid and ask prices and profit from the spread and, in some cases, from the net losses of their client base.
Straight Through Processing (STP): An STP broker routes client orders directly to a pool of liquidity providers (major banks). They typically profit by adding a small markup to the market spread.[3]
Electronic Communications Network (ECN): ECN brokers provide a digital hub where many liquidity providers and traders interact. These brokers offer raw market spreads and charge a fixed commission per trade.[4]
Technical infrastructure
Most modern brokers license white-label versions of industry-standard platforms:
MetaTrader 4/5: Developed by MetaQuotes, these are the global standard for retail trading due to support for "Expert Advisors" (automated trading robots).
cTrader: A platform often preferred by ECN brokers for its advanced order-routing transparency.
Proprietary Applications: Custom software built by the broker itself to provide a unique user interface or specialized tools.
Services provided
Trading Platforms: Software interfaces that allow users to analyze charts and execute trades.
Leverage: Brokers allow traders to open positions larger than their actual account balance by providing credit (e.g., 30:1 leverage).
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