ECN brokers (Electronic Communication Network brokers) are among the fastest emerging brokerages in Forex. In short, ECN Forex brokers provide a marketplace where traders & market makers can place competing bids against each other, sometimes as part of a hybrid ECN / STP execution model.
Top ECN Brokers at a Glance
- FXTM, Best all-around broker with high floating leverage and fast execution.
- FP Markets, ECN trading with leverage up to 1:500.
- BlackBull Markets, Best ECN trading environment, with scalping and hedging.
- Trade Nation, Simplified fixed cost trading for beginners.
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
ECN Brokers Comparison
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Regulators | CMA, CySEC, FCA, FSC Mauritius, FSCA | ASIC, CySEC, FSCA | FMA, FSA | ASIC, FCA, FSA, FSCA, SCB | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID |
Year Established | 2011 | 2005 | 2014 | 2014 | 2006 |
Execution Type(s) | ECN/STP, Market Maker | ECN/STP | ECN/STP, No Dealing Desk | Market Maker | Market Maker |
Minimum Deposit | |||||
Average Trading Cost EUR/USD | 0.1 pips | 1.1 pips | 1.3 pips | 0.3 pips | 0.9 pips |
Average Trading Cost GBP/USD | 0.2 pips | 1.4 pips | 2.0 pips | 0.7 pips | 1.5 pips |
Average Trading Cost Gold | $0.18 | $0.21 | $0.90 | $0.30 | $0.29 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform | MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Web-based | MetaTrader 4, MetaTrader 5, Trading View | MetaTrader 4, Proprietary platform, Web-based | Other, MetaTrader 4, MetaTrader 5, Web-based+ |
Islamic Account | |||||
Negative Balance Protection | |||||
| Visit Website | Visit Website | Visit Website | Visit Website | Visit Website |
FXTM
In Summary Best all-around broker with high floating leverage and fast executionFXTM can boast a lengthy and enviable track record. It enjoys a very high level of regulation and reputation, and it offers a highly competitive fee structure which tends to keep down the cost of trading. FXTM offers traders a choice between two of the most popular execution models: customers may open either an ECN-type account, or one that trades by “straight-through processing”. This is a similarly rare offer to that which fpmarkets puts on the table. FXTM clients have a straight choice between two trading platforms, with both MetaTrader 4 and MetaTrader 5 on offer.
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- No cryptocurrencies and limited choice of commodities
FP Markets
In Summary ECN trading with leverage up to 1:500fpmarkets is one of our top ranked ECN Forex broker due to their extremely wide range of assets and their very rare offering of a choice between ECN and STP execution models. They offer an unusual hybrid ECN/STP execution model which means that clients can choose between ECN style of execution giving a very high level of speed, and a “straight through processing” execution style which allows for more “natural” spreads. Traders can scalp and hedge at this broker, whose fast ECN execution speed makes it a natural home for scalpers. Clients may choose between the MetaTrader 4 and MetaTrader 5 platforms, and shares can be traded through the IRESS trading platform which includes access to level 2 exchange data.
Pros & Cons
- Choice of trading platforms and auxiliary trading tools
- Very competitive cost structure and excellent asset selection
- Low minimum deposit requirement and leverage of up to 1:500
- Well-regulated and trustworthy
- Availability of Iress geographically restricted
BlackBull Markets
In Summary Best ECN trading environment, with scalping and hedgingBlackBull Markets is a New Zealand-based Forex broker and Fintech company with a primary focus on ECN (Electronic Communication Network). The company launched in 2014 and is regulated through the New Zealand Financial Markets Authority (FMA), with additional regulation through the Seychelles Financial Services Authority (FSA). Like other ECN Forex brokers, BlackBull Markets is known among experienced traders for their speed and precision, and their maximum leverage is 1:500. They promise traders ECN/NDD execution with deep liquidity via their MT4/MT5 trading platforms, along with institution-grade pricing for retail traders via proprietary price aggregation. For social trading, BlackBull Markets features ZuluTrade and Myfxbook. However, cryptocurrencies and equity trading are not available, and you won’t find any MT4 or MT5 plug-ins here either.
Pros & Cons
- ECN/NDD execution model with deep liquidity
- Institution-grade pricing for retail traders via proprietary price aggregation
- ZuluTrade and Myfxbook for social trading
- Leverage of up to 1:500
- Limited deposit options
Trade Nation
In Summary Simplified fixed cost trading for beginnersPros & Cons
- Simplified trading environment for beginners
- One account type for all traders in eight account base currencies
- Quality trading tools embedded in the proprietary trading platform
- Balanced asset selection for international traders
- Limited payment processors
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsAvaTrade is one of the largest Forex / CFD brokers and well-known for offering their clients a choice of fixed or floating spreads. They have a very high and strong level of regulation. AvaTrade is directly regulated in Ireland (and by extension, the European Union), Australia, Japan, South Africa, and the British Virgin Islands. Outside the European Union, Ava offers maximum leverage on Forex currency pairs as high as 400 to 1. AvaTrade offers trading in over 55 different Forex currency pairs, 17 commodities, 20 equity indices, 14 cryptocurrencies, plus 66 individual stocks and shares. 2 bonds and 6 ETFs are also on the menu.
Pros & Cons
- High-quality educational offering via SharpTrader
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
What is a True Electronic Communication Network (ECN)?
A true ECN broker is a broker that plugs your orders into a network where it is automatically matched to a matching order from another client or liquidity provider. Most brokers claiming to be ECN brokers are probably telling the truth about this at least, although if you see generally large spreads, spreads that never seem to really vary, or continuously slow execution, they are almost certainly not.
A bigger problem arises when we ask what qualifies as a “liquidity provider”? If it is just another dealing desk, then how can it be a “true” ECN offering? A network is only as good as its source. To be regarded as a real ECN broker, the liquidity provider should really be a tier 1 bank. So, you must wonder why many brokers that advertise themselves as ECN brokers refuse to say which liquidity providers they use.
Another question is how orders for mini-lots (0.1 lots), let alone micro-lots (0.01 lots), could possibly be sent straight through to tier 1 banks for processing. An ECN broker offering smaller minimum trade sizes than full lots must inevitably perform a “bucketing” of orders, and that will require a kind of dealing desk to process and allocate the bucketing.
The final question is, does it really matter? If a broker is at least trying to match orders directly, there is not much of a conflict of interest, potential or otherwise.
How Do I Open an ECN Account?
Opening an ECN account follows the same process as any account type via a straightforward and convenient online application process.
Here are the steps to open an ECN account:
- Make sure your Forex broker offers ECN accounts
- Review the account parameters and ensure the ECN account offered is genuine and offers raw spreads and fixed commissions by volume traded.
- New traders should select the ECN account as an option during the account opening process, while existing traders should be able to add an ECN account from the back-office.
- Account verification is a mandatory step for first-time clients of a Forex broker.
- Funding the account is the final step to take before trading your ECN account.
Basics of an ECN Broker
An ECN broker runs a computerized system which matches its customers’ trade orders electronically and automatically. For example, customer A wants to sell 1 lot of EUR/USD at the price of 1.2000. Customer B wants to buy 1 lot of EUR/USD at the same price. An ECN broker will have a system that can match these two orders, where the broker does not take the other side of the trades. The ECN broker makes most of its profit from charging commission on each trade order which is matched.
You will know you are looking at an ECN broker when you see tight spreads and fixed commissions.
Understanding the ECN
ECN brokers will observe different price offerings, known as quotes, from the different liquidity providers they use and offer their customer access to the one with the best spread. The spread will depend on the difference between the buying and selling price and it is measured in pips.
Spreads tend to be lower at ECN brokers, but ECN customers need to understand that the true “spread” is really the spread plus commission charged.
As ECN brokers do not “make a market”, when there are high-impact events in the market which trigger high volatility, it can actually be more difficult to trade normally with an ECN than it might be with a market-maker / no dealing desk broker.
Benefits of the Electronic Communications Network
- True ECN brokers do not profit from their clients’ net losses, removing conflict of interest.
- Order matching plus net orders to liquidity providers means fewer potential conflicts of interest.
- Lower overall cost of trading.
- Honest, automated, anonymous, and fast trade execution.
- Occasional inverted spreads.
Disadvantages of the Electronic Communications Network
- Once commissions are factored in, the smaller trader might find they are paying the same overall cost of trading as they would at a market-maker broker.
- Spreads can be very unpredictable in an ECN network and be especially wide during periods of unusually low liquidity, such as just before a major news release.
- Some ECN brokers do not offer trading in micro-lots but impose a minimum trade size of 1 mini-lot.
- Many ECN brokers require higher minimum deposits than market-maker brokers.
How Does an Electronic Communication Network Work?
Once you place a trade, it will be matched with a buy or sell order from someone else in the world. It will be executed immediately and anonymously, and you will be charged a fixed commission price and probably a relatively low spread.
What are the Differences Between ECN and STP?
- ECN brokers give access to raw spreads for a fixed commission per volume while STP brokers offer commission-free trading with higher mark-ups, like market makers.
- Trading costs are generally lower at ECN brokers than STP brokers, making them better suited to high-volume traders.
- STP brokers can manipulate quotes while ECN brokers connect counterparties without being able to influence bid and ask prices.
- ECN brokers can offer a conflict-of-interest-free execution environment, but STP brokers walk a fine line and remain vulnerable to a potential conflict of interest, due to their ability to increase spreads.
- An ECN consists of a broad network of liquidity providers, including banks, prime brokers, hedge funds, and smaller market participants, which are used to match buyers and sellers. STP brokers pass on orders directly to liquidity providers.
What to Consider When Choosing an ECN Broker
The best ECN trading account forex broker for you will depend upon:
- Where you are resident – will the broker take you, for example USA. Also, tax reasons, for example UK residents can benefit from spread betting brokers.
- How large or small you trade / how often you trade / what you trade – these impacts cost of trading.
- Minimum deposit size you can afford.
- Regulatory framework and reputation of the broker.
- Size of spreads / commissions – medium and large traders should pay less than 1 pip overall on the benchmark EUR/USD Forex currency pair.
- Overnight financing rates (swaps) which are generally charged each day against positions left open at 5 pm New York time. For position traders, these rates can make more difference to overall profit and loss than the spreads charged. However, if you are going to be leaving trades open for only minutes or hours but making many more trades, the spreads become a more influential factor, and overnight financing may not be an issue at all.
- Quality of broker’s trading platform(s) - does it work smoothly, is execution fast? It is easy, intuitive, and pleasant to use?
- Ignore bonuses, they will not make a difference to your profitability, but discounts for large trading volumes can be worthwhile for traders of large quantities.
Why do ECN Brokers Need to be Regulated?
It is important for any broker to be regulated in order to keep your funds safe and protect you against fraud. Reputable brokers are generally multinational and therefore supervised by more than one regulatory body. You will be assigned to the broker’s legal entity most suitable to your country of residence, which means policies may differ between different geographical branches of the same broker.
Commissions & Fees
An ECN broker will give you low spreads. However, they will charge commission as well as spread, unlike non-ECN brokers which typically will not charge commission.
For example, the broker FXCM offers a non-ECN “standard account”. Its minimum spread in trading the EUR/USD currency pair is 1.3 pips, but no commission is charged. The broker fpmarkets offers an ECN account with an average spread of 0.1 pips in EUR/USD but also charges a commission per trade (i.e. entry and exit) equivalent to 0.3 pips. This means that under these conditions, the cost of each trade would be 0.4 pips (0.1 pip spread plus 0.3 pips commission).
Funding & Withdrawal Methods
Funding and withdrawal methods will depend on each broker. Your options might be e-payments, debit cards, credit cards or bank wire transfers. Some brokers specify minimum and maximum withdrawal or deposit amounts. They might charge a fee depending on the method you choose, and the procedure can be immediate or take up to a few business days. In any case, no withdrawal should take more than three working days to process unless there are unusual circumstances.
Many brokers impose minimums or even maximums on deposits and withdrawals. Most typically, minimums are imposed on deposits and maximums imposed on withdrawals.
For example, the ECN broker fpmarkets will only accept a deposit that is at least $100 or the equivalent. They impose maximum daily limits on deposit through certain payment channels due to anti-money laundering requirements. Regarding withdrawals, fpmarkets set no maximum limit as long as there are sufficient funds available in the account.
ECN Brokers with Round-the-Clock Support
If you choose to deposit with an ECN broker, it might be a good idea to make sure they offer around-the-clock support. The reason behind this is because ECN brokers authorize 24/7 orders for crypto CFDs, and the Forex worldwide is open around the clock from Monday in New Zealand until Friday evening in New York. There are even a few Forex brokers offering weekend trading.
Understanding Different Types of Brokers
Once you know what your goals as a trader are, it is important to understand the types of brokers and what each of these has to offer. The first thing you should look at is the type of network they offer. These could be ECN, STP or the hybrid model which is ECN+STP.
Brokers can be categorized depending on the network they use to function, thus offering different prices, trading hours and execution times. The available systems are ECN, STP and ECN+STP.
Dealing Desk
A dealing desk is a network operated by certain brokers. When you place an order through a dealing desk, your broker will take the other side of your trade. In other words, the broker employs skilled professionals, or maybe operates an algorithm, to build an inventory of currencies which it passes off to its customers at different prices as required. There will usually be relatively fixed spreads, and they do not depend on an external liquidity pool. Dealing desk brokers are also known as market makers.
No-Dealing Desk
This means the market order does not pass through a market maker. Buys and sells go
directly to the liquidity provider. No-dealing desks can either be STP or ECN brokers.
STP brokers
STP stands for Straight Through Processing. It is a no-dealing desk broker. STPs will set prices and market conditions depending on the customer’s trade volume, performance, and account type. They offer relatively small commissions and higher spreads.
ECN brokers
An ECN broker will consolidate their prices after comparing costs from several market providers in order to offer the lowest spread. They will earn their profit by charging a fixed commission.
Hybrid Model
A hybrid model is when both ECN and STP models are fused together in order to create a better deal for both the broker and the client. They can use characteristics from ECN and STP to automate trades, change spreads and commissions, and work with different markets.
ECN vs Standard Account
If you see a broker offer something called a “standard account”, that broker (or at least, that account) will almost certainly not be an ECN. They will probably be offering an account which operates under a market-making order execution. Make sure you know what you are getting.
Alternative ECN Brokers
We have listed what we consider to be the top 4 ECN brokers. We note there are a number of alternative brokers widely recognized as ECN brokers:
You might also be interested in reviewing the below top brokers:
