In Layman's terms, "brokers" could be individuals who act as middlemen or agents. In foreign exchange trading, these persons may be referred to as forex brokers tasked to connect a seller and a buyer to the trading arena as per Independent Investor.
Since a big number of successful and large forex brokers rely on financial institutions that give them market prices, these prices are handed down to traders in the form of asking or bid price.
One needs to understand the various kinds of brokers and their target niche to fully grasp the nature of their work. Generally, only four types of such brokers exist although other foreign exchange bodies may think otherwise.
Market Makers/Dealing Desks forex brokers
These types of forex brokers are financial experts that run "route orders" through their Dealing Desk. Also known as a "trading desk", dealing desks provide brokers with instant access to trading executions.
Market Makers quote fixed or variable spreads and they are usually not the kind of forex brokers whom you can depend on as they do not necessarily look after your best interest simply because of their trading desks.
No Dealing Desk
These types of forex brokers give access to inter-bank markets without the need to pass orders through the Market Makers. And with genuine NDD brokers, re-quotes on order are no longer necessary and there is also no extra pause in times of order confirmations.
STP, ECN
NDDs can send an order straight from customers to liquidity providers. STP brokers usually have a single liquidity provider, sometimes more. The more liquidity and banks there are in the system, the better the fills for the STP brokers' clients.
Forex brokers for ECN also enables orders of clients to connect with the orders of other clients and provides a landscape where players, such as Dealing Desks, individual traders and banks can engage in a trade against one another by sending offers and bids on the table.