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A dealing desk is the broker’s operational place tasked with monitoring the exposure of the company to market risks.
It is run by the risk management team and is typically associated with forex markets, which comprise the largest market share.
That said, modern brokers which are offering CFDs on indices, commodities and stocks are also run by dealing desks.
Given the round-the-clock nature of the FX market, dealing desks are constructs that are scattered globally.
This helps ensure the smoothest execution of trades across a wide range of financial products.
Not all brokers are required to use dealing desks. Brokers that utilize dealing desks are known as market makers.
By extension, those refraining from dealing desks can be classified as Straight-Through Processing (STP) or Electronic Communication Network (ECN) + STP.
FX brokers using dealing desks quite literally create a market for their clients, meaning they often take the other side of a client’s trade.
Institutional Dealing Desks
At an institutional level, dealing desks are also present at prime brokerages and are tasked with mitigating the risks for the firm and are taking care of price formation mechanisms.
Such financial institutions are usually very large with high-volume trades that have access to whole dealing facilities or departments.
This can lead to staffs of hundreds of dealers at multiple desks. Therefore, the dealing desk is a rather large-scale operation.
However, most dealing desks nowadays are completely automated and only require supervision by risk management professionals, which are tweaking certain parameters and are vigilant around major news events that can distort market prices.