Episode 02 · Beginner · 7 min read
Exchange vs broker: who is on the other side?
On an exchange you trade with other traders in one order book. Some brokers take the other side themselves. See a real book and how busy it is.
Exchange or broker: who is on the other side of my trade?
On an exchange, the other side is another trader: your order meets theirs in one shared order book. With a broker that takes the other side itself, you trade with the broker, at the price it quotes you.
Every trade needs someone on the other side
When you buy, someone sells to you. When you sell, someone buys from you. A trade is always two people agreeing on a price, as we saw in what a price is. The question of this lesson is simple: who is that someone?
There are two answers, and they change how your price is made.
Some brokers only pass your order on to an exchange: then you are on the left side, through the broker.
On an exchange: other traders, in one order book
An exchange is a market place. It does not buy or sell to you. It keeps one shared order book where every buyer and every seller leaves their orders, and it matches them when the prices meet. Stock exchanges work this way, and so do crypto exchanges such as OKX.
You can see the book. Here is a real one, saved from the bitcoin perpetual future on OKX (a crypto perpetual). Each price level can hold orders from many different traders: in the ten best levels on each side we counted 146 separate orders waiting.
Sellers (asks)
Buyers (bids)
Buy now: you pay the lowest ask, 78,105.5. Sell now: you get the highest bid, 78,105.4.
With a broker: it depends what the broker does
A broker is a company that gives you an account and an app. What happens to your order next depends on the broker:
- Some brokers only pass your order on to an exchange or to other firms. You are still trading with other people, through the broker.
- Some brokers take the other side themselves. Your trade never reaches a shared book: the broker quotes a price and you buy from it or sell to it. This is common for CFDs (contracts that follow a price) and for forex.
When the broker takes the other side, your gain is its loss, and your loss is its gain. That is one reason why regulators in Europe make CFD brokers show how many of their clients' accounts lose money, on their pages and in their ads.
A broker that takes the other side is legal and can be well run. The point is to know which kind yours is: its client agreement says how your orders are carried out ("order execution policy").
How busy is the other side? Market kind by market kind
On an exchange, the other side is real orders from real traders, so you can count them. We counted trades a minute on OKX for three kinds of market: crypto perpetuals, stocks (contracts that follow the S&P 500 and the Nasdaq) and commodities (gold, silver, oil). Forex is not traded on OKX, so we did not measure it.
Not measured: Forex is not traded on OKX: not measured.
Not measured: Measured on a Sunday: stock contracts trade far less while US markets are closed.
How it was measured
OKX public data: the latest 500 trades of BTC, ETH, SPY, QQQ, XAU, XAG, BZ, CL perpetuals (trades a minute = 500 ÷ the minutes they cover), median per kind; Bitcoin's book: orders in the 10 best levels each side.
We measured on a Sunday, with US markets closed. Stock contracts trade much less when the US stock market is closed, so their number here is a quiet-time number.
Flip the cards
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Quick check
You buy on an exchange. Who sells to you?
Questions people ask
Is my broker an exchange?
Usually not. Most apps you sign up with are brokers. Some send your orders to an exchange, others take the other side. A few, like crypto exchanges, are the exchange itself.
How do I know if my broker takes the other side?
Read its order execution policy and its client agreement. Words such as "market maker", "dealing desk" or "we act as principal" mean the broker is your counterparty.
Is trading with a broker that takes the other side a scam?
No. It is a normal, regulated business model. It does mean the broker earns when clients lose, so check its regulation and read its risk warning.
Why can I see an order book on an exchange and not with my broker?
The book belongs to the exchange. A broker that takes the other side has no shared book to show: it gives you its own bid and ask.
Are forex trades made on an exchange?
Most retail forex is traded with brokers, not on one central exchange. That is also why forex is not in our OKX data.
Next in Market Basics: stocks, and what you really own when you buy one. Want to see how we test trading ideas with real costs? Read our method.
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Education about how markets and tests work. Not financial advice.