ECN forex brokers use an electronic communication network to connect users so that they can trade assets directly on the financial markets. This generally results in fast and efficient order execution and makes the whole process fair and transparent. ECN brokers do not hold assets or trade ‘against’ their clients. They simply act as a facilitator, allowing traders to easily buy and sell financial instruments within the network.
Forex ECN brokers operate a straight-through processing (STP) trading model and do not have a dealing desk. With a true ECN broker, traders will find that the broker does not interfere with the trading process at all. ECN forex brokers usually match each order at the best price currently available from other market participants or their liquidity providers, meaning that at times, some ECN brokers can offer spreads as low as 0 pips.
The Best ECN Forex Brokers
| Broker | Features | Min Deposit | EURUSD Spread | ||
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 Your capital is at risk
US Clients: No Regulated : Yes
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– Flexible leverage up to 500:1 |
$200 | From 0.1 | ||
 Between 74-89 % of retail investor accounts lose money when trading CFDs
US Clients: No Regulated : Yes
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$200 | NDD 0.09 / Standard 0.69 |
Sign
Up
Between 74-89 % of retail investor accounts lose money when trading CFDs
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 Your capital is at risk
US Clients: No Regulated : Yes
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$5 | From 0.0 pips | ||
 Your capital is at risk
US Clients: No Regulated : Yes
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– АSIC, CySEC Regulated |
$100 | From 0.0 pips | ||
 Your capital is at risk
US Clients: No Regulated : Yes
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– Regulated by FCA, FSCA, CMA and FSC |
$200 | ECN 0.1, Standard 1.6 | ||
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ECN Broker Benefits
There are various benefits when it comes to using an ECN broker over a more traditional market maker broker:
- ECN forex brokers offer tight spreads, usually starting from 0 pips on major forex pairs, depending on your account type.
- ECN brokers offer fast execution, which means that clients can generally avoid slippage and re-quotes – usually the price you see is the price your order will complete at when using an ECN broker.
- ECN forex brokers offer transparent pricing – there will generally be a set commission for each trade, so you know in advance what your transaction costs will be.
- ECN brokers do not manipulate the market – these brokers simply provide the network through which transactions are made, rather than buying and selling instruments themselves, so they do not, and indeed cannot, influence or manipulate prices.
- Related to the above point, forex ECN brokers do not have a conflict of interest – unlike market maker brokers, they are not actually buying or selling to their clients, so they do not ‘lose’ when the client ‘wins’.
ECN Broker Disadvantages
- While pricing is transparent with ECN forex brokers, and spreads can be tight, the cost per trade can still be higher than with a traditional broker due to set commissions for each transaction.
- ECN brokers may have higher minimum deposits to open an account than some market maker brokers.
- ECN forex brokers do not tend to offer micro lots, often having a minimum position size of 0.1 lot, whereas traders can open positions for 0.01 lot on other platforms.
Conclusion
ECN forex brokers are highly popular among traders due to their transparency, tight spreads, and fast execution. Many traders prefer a platform that simply facilitates their trading activities, rather than a dealing desk model, where the broker is buying and selling instruments, which means that in effect, the broker is trading against its own clients. As with everything, however, there are some drawbacks to using ECN brokers, not least of all the fact that the overall cost per trade can be higher.