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.
Back To Basics: What is ECN Trading?
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.
Recommended & Reputable ECN Brokers in 2023
Use our comparison table to compare some of the best ECN brokers. Compare typical spread costs, leverage, minimum opening amounts, plus other important features.
What Are The Key Advantages Of Using An ECN Broker?
- Superior PricingAs trading using an ECN broker is anonymous and there is no dealing desk intervention, traders can take advantage of superior pricing which typically means lower trading costs (tighter spreads, lower commissions). ECN brokers generally charge upfront fixed commissions rather than marking up their spreads like a market maker, so you know how much each trade will cost.
- Fast Order ExecutionTrade execution is far quicker using an ECN broker than other broker models as there is no dealing desk intervention. A dealing desk slows the process down, client trades are sent direct to the market, ensuring the best possible price each time.
- Access Deep LiquidityWith ECN trading, clients like you and me have access to significant market participants such as institutional clients – this means everyday clients have an opportunity to trade within a worldwide liquidity pool, resulting in tighter pricing and guaranteed order execution.
- All Trading Strategies AcceptedAs trading with an ECN broker gives you access to advanced trading technology and pricing from multiple liquidity providers, there are no re-quotes and price execution is almost guaranteed. All trading strategies are accepted (including scalping!) on ECN trading platforms as ECN brokers do not care if you win or lose (they make their money from commission charges).
- Price-Feed TransparencyAll ECN brokers (and clients) have access to the same price feeds – this helps limit price manipulation and ensures a level playing field for all involved.
The Downside Of Trading With An ECN Broker
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.
How Do You Find The Best ECN Broker?
- RegulationAlways choose an ECN broker that is regulated by an appropriate governing body, such as the FCA in the UK. Regulated brokers are a much safer choice as they commonly segregate client funds with top tier banks. Plus they are continuously scrutinised by their governing body to act in accordance with local laws & regulation.
- Trading CostsDo some research before opening a live ECN trading account. Various brokers may claim their spreads “start at 0 pips” etc, however most times that is just a marketing ploy to get you to sign up. Call around and check out a few website’s before committing to one. Always remember, the wider the spread or greater the commission charge, the more a broker is charging you to trade.
- Minimum Deposit RequirementsHow much cash do you need to deposit before you can start trading? Most brokers will have a minimum deposit requirement of $0 (but you won’t be able to trade). And some like IC Markets and Pepperstone require a minimum of USD $200.
- LeverageDo you require high amounts of leverage to operate your trading strategy? Or are you more prudent and only require a lower rate of leverage? Most brokers will give you the option if you want leverage reduced. Do your research.
Different Broker Model Types
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 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:
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.