A broker advertising "zero commission" is not working for free. The money is coming from somewhere, and knowing where changes which broker you should use — and occasionally explains why your fills are worse than your backtest.
Two business models
Retail forex brokers fall into two broad camps, and many operate a hybrid.
Market makers (dealing desk). The broker takes the other side of your trade itself. When you buy, it sells to you. It manages the resulting exposure by netting clients against each other — one client long and another short cancel out — and hedging whatever imbalance remains with a larger institution.
ECN / STP (no dealing desk). The broker routes your order to external liquidity providers and charges an explicit commission for doing so. It does not hold a position against you; it is a conduit.
Where the revenue actually comes from
- The spread. The gap between bid and ask. On a market-maker account this is usually the entire fee, marked up from the raw interbank spread.
- Commission. A stated charge per lot traded, typical of ECN accounts, alongside a much tighter raw spread.
- Swap / rollover. Interest for holding overnight, with the broker's margin built into both the charge and the credit.
- Client losses. For a market maker, the unhedged portion of client flow. If a client loses, that money stays with the broker.
That last line is the one worth sitting with. It does not mean your broker is manipulating prices — a regulated firm has far more to lose than to gain from that. But it does mean a pure market maker's revenue is partly a function of client losses, and that is a structural conflict rather than an accusation.
Comparing the two honestly
"Commission-free" versus "commission plus raw spread" is not a real choice until you total both.
Say EUR/USD, one standard lot, round trip:
- Market maker: 1.4-pip spread, no commission → about $14.
- ECN: 0.2-pip raw spread + $7 round-turn commission → about $9.
The commission account is cheaper here despite looking more expensive on the label. Reverse the numbers and the answer flips. The only way to know is to add the spread cost and the commission together for the pair and size you actually trade.
For infrequent trading on major pairs the difference is minor. For anything high-frequency it compounds into the single largest drag on results.
Execution, which matters more than the fee
Two things quietly cost more than either spread or commission.
Slippage is the difference between the price you asked for and the price you got. It is normal in fast markets and should cut both ways — sometimes better, sometimes worse. Slippage that is consistently against you is a red flag worth logging.
Requotes — being offered a different price instead of a fill — are a market-maker behaviour and a reason to look elsewhere if they are frequent.
Regulation is the real filter
Before comparing costs at all, check who supervises the firm. Regulators such as the FCA, ASIC, CySEC and the NFA impose capital requirements, client-money segregation, and a complaints process that exists.
Segregation is the important one: it means client funds are held apart from the firm's own money, so a broker failure does not automatically take deposits with it. An unregulated broker offering 1:1000 leverage and a generous bonus is not competing on price — it is competing on the absence of the protections that make the price meaningful.
What to take from this
- Market makers take the other side; ECN brokers route out and charge commission.
- "Zero commission" means the fee is inside the spread, not absent.
- Compare total round-trip cost — spread plus commission — for the pair and size you trade.
- Persistent one-sided slippage and frequent requotes are worth more attention than the headline spread.
- Check regulation and client-money segregation before comparing anything else.
Next, the largest of those costs in detail: what spreads really do to a strategy, and when they widen most.