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Compare The Best ECN Brokers
ECN brokers are essentially forex brokers that operate with no dealing desk; instead they connect traders direct to liquidity providers. As ECN brokers have no dealing desk, they do not profit when traders lose money (like a market maker does).
Trading with a regulated ECN broker has many benefits, including faster execution speeds and lower spread costs. But are ECN brokers are good fit for your trading needs?
Below, we will dive into what ECN trading is all about, the pros & cons of ECN trading, and also compare some of the best ECN brokers available.
Firstly, ECN stands for Electronic Communication Network.
An ECN is a bridge that links trader’s direct to liquidity providers via an ECN broker platform. This bridge is made possible through the use of sophisticated technology. As an ECN broker consolidates its pricing from multiple providers, it can typically offer far better pricing to clients.
ECN = “non-dealing desk”, but what does this mean?
All ECN brokers are non-dealing desk, which means that they do not ‘make a market’ or pass on orders. Instead, they match market participants in a trade electronically and pass these orders direct to the liquidity providers. As an ECN broker is only matching orders, it cannot trade against the client like a market maker does. More on this below.
Use our comparison table to compare some of the best ECN brokers. Compare typical spread costs, leverage, minimum opening amounts, plus other important features.
Variable spreads
All ECN brokers offer variable spreads which means spreads can widen quite dramatically in times of market volatility. Wider spreads = higher trading costs. It is also worth noting that commissions for using an ECN broker are typically higher than other broker models.
Market Maker (MM)
Market Makers “make” their own market bid/ offer prices based on the underlying exchange market pricing. When you trade with a MM broker, they take the other side of your trade in the hope that you lose your trade.
STP
STP stands for ‘Straight Through Processing‘. These brokers operate a non-dealing desk and send all their client’s trades straight to their Liquidity Providers for trade execution. The main advantages of using an STP broker are; faster execution, reduce slippage/ re-quotes and superior pricing.
What are ECN brokers?
ECN brokers connect traders to a network of liquidity providers. This means there is no dealing desk intervention, like there would be if you traded with a Market Maker broker.
An ECN broker is essentially the middleman in the centre of the communication network (ECN). It passes your trades direct to a liquidity provider (LPs) that is offering the best price. These LPs are typically hedge funds, other brokers and top-tier Australian banks.
Do ECN brokers charge commission?
Yes, most will.
The reason they will charge you a commission is because most ECN brokers do not make any money from the spread. The commission charge should be viewed as a small fee for providing you with the best price and trade execution.
Is there a conflict of interest when trading on an ECN platform?
No, not really.
As an ECN platform is passing your trades direct to the market and there is no dealing desk intervention, there is no conflict of interest. In comparison, market makers trade against their client base, so when you lose, they profit.
Most traders seek out ECN brokers because of this lack of conflict of interest between trader and broker.
Which trading platform can I use when ECN trading?
Most ECN providers offer one of the following three platforms:
- MT4
- MT5
- cTrader
All three are excellent choices for ECN trading and most traders will be familiar with these 3 platforms.
How much do I need to deposit to gain access to an ECN platform?
Most ECN brokers will ask for a slightly higher minimum deposit amount. But there is good reason for that – the costs involved in running an ECN brokerage are incredibly high and so traders may be charged more as a result.
Should beginner traders use an ECN Platform?
Ultimately this is your decision as a trader but we would say that an ECN platform is probably not the best for a beginner.
Not only are the minimum deposit amounts higher but trading costs can be complicated to calculate, requotes are prominent and ECN brokers are not known for offering forex education to newbies.
