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.
Daily market research and Autochartist access
High floating leverage + fast execution
Best ECN execution on the MT4 platform
Excellent implementation of cTrader and Smart Trader Tools
Solid broker for scalping and hedging
Institutional-style trading opportunities for retail traders
- FP Markets, ECN trading with leverage up to 1:500..
- FXTM, Best all-around broker with high floating leverage and fast execution.
- Pepperstone, Great ECN execution on MT4 platform.
- BlackBull Markets, Best ECN trading environment, with scalping and hedging.
5.0/5 in this category
ECN trading with leverage up to 1:500.
fpmarkets 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.
FP Markets 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
5.0/5 in this category
Best all-around broker with high floating leverage and fast execution
FXTM 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.
FXTM 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
Proprietary copy trading platform, low minimum deposit, and high leverage
5.0/5 in this category
Great ECN execution on MT4 platform
Pepperstone, founded in 2010 and headquartered and regulated in Australia, the U.K., and Dubai, is possibly the most well-known ECN Forex broker in the world. As an ECN broker, Pepperstone offer raw spreads and low commissions. Taken together, Pepperstone’s “Razor” account gives one of the lowest and most competitive cost of trading in Forex that you will find anywhere. ASIC’s deft regulatory touch combined with local expertise made Australia a haven for broker startups heavy on technology and offering extra-speedy frictionless execution and extremely high maximum leverage. Pepperstone offer geographically eligible clients a maximum leverage as high as 500 to 1, which is enough for anybody’s trading needs.
Pepperstone Pros & Cons
Excellent choice of trading platforms consisting of MT4/MT5, and cTrader
Market-leading MT4/MT5 upgrade package, Autochartist, and API trading
Social trading support via Myfxbook, MetaTrader Signals, and DupliTrade
Leverage of up to 1:30 and superb trade execution
4.5/5 in this category
Best ECN trading environment, with scalping and hedging
BlackBull 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.
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
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.
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.
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.
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.
- 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.
- 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.
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.
- 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.
Traders who have never used an ECN broker will find that the experience of ECN trading can be very different to trading with brokers using the more common market-maker / dealing desk execution model. ECN trading can be less liquid when major events are moving the market. Market-makers tend to widen spreads at these moments, but ECN brokers will often present very large and sudden price jumps in their price feed, even if spreads will tend to remain somewhat lower than those offered by market-maker brokers.
As a general rule, trading liquid markets during periods of peak liquidity is where the practical benefits and economies of ECN trading become most obvious.
Possibly one of the greatest benefits of using an ECN broker is largely intangible: knowing that you have no potential conflict of interest with your broker, because they do not make any additional profit when you make a losing trading.
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.
- Where is the broker regulated? Reputable financial centers with strong regulatory protection for retail traders are best.
- Does the broker have a generally good reputation? Do some internet searches and see what customers say, but do not believe everything you can find without verifying it. Pay most attention as to whether they have been fined or censured by any regulator or legal system.
- Has the broker been in business for a long time? As a general rule, the longer a broker has been in business, the better. Two years in business is a good minimum benchmark.
- Is the broker clear about having the capability to process withdrawals quickly? Anything longer than 3 business days should raise a red flag.
- The broker should offer the kind of customer support that responds efficiently to any serious problem flagged by a client within 24 hours.
- If you are very determined to find “true” ECNs, be aware that this type of broker will sometimes momentarily offer inverted spreads. An inverted spread is one where the bid price can be lower than the ask price for a few moments.
- Check to see the full range of assets offered by the broker, and what the typical spreads, commissions, and overnight fees applicable stand at.
- Check to see that a broker’s required minimum deposit (if any) is not greater than the sum you are willing and able to deposit.
- If you have a favored trading platform you are really set on using to trade, you should check whether a broker offers that platform. Alternatively, you may want to at least check that the platform or platforms offered are acceptable to you.
- If you are looking for an Islamic or Nano account, check that the broker offers such an option.
- Check the available funding methods for the ECN Brokers – do they accept e-payments, debit cards, credit cards or bank wire transfers?
- Does your ECN broker offer local training and seminar presentations?
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.
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 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.
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.
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.
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.
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 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.
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.
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.
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.
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:
What are ECN brokers?
ECN brokers are non-dealing desk brokers offering right spreads, 24/7 trading hours, immediate execution, and fixed commissions.
Which is the best ECN broker?
It will depend on your needs. It is always a good idea to try out a demo account and see if the broker meets what you are looking for. Check the maximum leverage offered, minimum deposit required, range of assets, regulation, and platform types. If they match what you are seeking, that ECN broker deserves a place on your shortlist.
Which is better? ECN or STP?
In practice, there is often little difference between two execution policies where one is labelled “ECN” and other “STP”. To some extent these terms are ill-defined, as one may be used rather than another primarily for marketing purposes. The best approach is likely to be one of looking into and understanding the details of a broker’s actual execution policy rather than the label it gives itself, then comparing between prospective broker candidates.
How do ECN brokers make money?
ECN brokers make money from fixed commissions charged to the customer on each trade.
Thinking of switching from a traditional broker to an ECN Forex broker? Discover the differences between market makers (aka standard Forex brokers) and ECN brokers, and determine which one can meet your current trading needs. Read more...
Looking to enjoy the benefits of ECN Forex trading with the convenience of the MetaTrader 4 platform? This article explores the advantages and disadvantages of the MT4 ECN Forex platform. Read more...