ECN Forex Brokers

ECN Forex Brokers

ECN is the acronym for “Electronic Communication Network”, and this refers to a system of forex trading that is designed to eliminate any form of interference from a middleman or a brokerage dealing desk in the order execution process.

Put in plain simple language, this means that an ECN forex broker is a forex brokerage firm that does not interfere with the pricing and order placement and execution process, by providing other participants in the forex market with direct access to liquidity providers (the banks that set prices of currencies).

 

Recommended ECN Forex Brokers 2017:

1
Min. Deposit
$10
Exclusive promotion
Our score
10
55+ currency pairs available
Trade on a trusted platform
24/7 support via live chats, email or phone call
Start Trading
Description:
LonghornFX is a true ECN STP broker dedicated to delivering a superior trading experience to traders no matter their level of experience. Their services are based on transparency, innovation and efficiency, ensuring an unparalleled trading experience for all.
Payment Methods
Credit Card, Debit Card, Visa, Bitcoin
Full regulations list:
LonghornFX offers high-leverage trading on a wide variety of assets. Trading with leverage carries a degree of risk which may result in losing more than your investments. Clients should practise risk management to protect themselves from losing more than they can afford when trading with leverage.
2
Min. Deposit
$10
Exclusive promotion
Our score
9.3
0% Commission Account
Low Spreads
Eco-Account Option
Start Trading
Description:
CedarFX is an eco-conscious broker offering 0% commission trading on 170+ assets, including Forex, Cryptocurrency Pairs, Stocks, Indices and Commodities. With up to 1:500 leverage, no-fee transactions and low spreads, traders can make the most of their funds. CedarFX also offers an Eco Account option to support tree planting and sustainability projects.
Payment Methods
Bitcoin, Credit Card, Debit Card
Full regulations list:
Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience, before trading, and if necessary seek independent advice.
3
Min. Deposit
$200
Exclusive promotion
Our score
8.7
Join the Social Trading revolution. Connect with other traders, discuss trading strategies, and use our patented CopyTrader
eToro is the world’s leading social trading platform, offering a wide array of tools to invest in the capital markets
Largest number of currency pairs to trade
Start Trading
Description:
eToro is a multi-asset investment platform with more than 2000 assets, including FX, stocks, ETF’s, indices and commodities. eToro offers a wide range of currency pairs and other trading instruments. eToro users can connect with, learn from, and copy or get copied by other users.
Payment Methods
Wire Transfer, Bank Transfer
Full regulations list:
CySEC, FCA
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
4
Min. Deposit
$10
Exclusive promotion
Our score
8.5
Can fund with BTC
64 global companies including Netflix and Amazon
Free deposits and withdrawals
Start Trading
Description:
EagleFX is an online digital asset, Forex and CFD broker providing traders across the globe with cutting edge technology to trade the world’s markets. Our focus has been to change the way people trade Digital Assets and Forex. We are driven to provide traders with incredibly low-cost pricing across all Digital assets, FX, stocks, indices, commodities and futures along with industry-leading 24/7 live customer support.
Payment Methods
Credit Card, Debit Card, Bitcoin, Wire Transfer
Full regulations list:
EagleFX offers leveraged trading on a range of assets within its platform. CFD and Spot Forex trading do carry a degree of risk which may result in you losing more than your initial investment. Please ensure you fully understand the risks involved with leveraged trading and ensure this is not detrimental to your personal or institution's financial well being.
5
Min. Deposit
$200
Exclusive promotion
Our score
7.9
BlackBull Markets’ unique feature lies in its stated goal of delivering an “institutional” trading experience to retail clients
No-Dealing Desk Broker (NDD), with Straight Through Processing (STP) all done on a true ECN
State of the art Equinix servers, based in New York (NY4), London (LD5) and Tokyo (TY3)
Start Trading
Description:
BlackBull Markets is a top-tier, award-winning, and financially registered forex broker with a globally trusted presence. Operating since 2014, BlackBull Markets is now the fastest growing financial services business in New Zealand. We were founded with the goal of becoming the leading online Financial Technology and Foreign Exchange broker. BlackBull Markets is a true ECN, No Dealing Desk brokerage specializing in Forex, CFDs, Commodities, Fibre Optic Communications and Fintech solutions for a global clientele.
Payment Methods
Mastercard, Visa, Bank Transfer, Neteller, Skrill, UnionPay, FasaPay
Full regulations list:
FSPR, FMA New Zealand

How Does ECN Trading Work?

In order to understand how this process works, you need to understand the structure of the forex market. Banks constitute probably the biggest players in the market, with large caches of currencies. When they trade among themselves in very large volumes, the forces of demand and supply create the pricing structure of currencies. The pricing of a currency pair can therefore not be the same with any two liquidity providers. These liquidity providers now buy and sell these currencies at the rates that are displayed in the market, but these transactions require huge amount of liquidity.

A market maker, who typically deals with traders with small capital that is not enough to cover the required liquidity, will fill the liquidity gap by acquiring these positions in large volumes, and fragmenting these into smaller volumes that can be taken up by the small clients. The pricing in this case is now fixed by the market maker. In other words, the market maker has “made” the market. So when a trader buys a currency, he is buying it from the market maker who is selling, and when the trader sells the currency, he is selling it to the market maker who buys it off him. Thus market makers act as counterparties to the trade. These transactions are done via the dealing desk.

The scenario in a true ECN setting is different. The ECN forex brokers send orders to the liquidity providers directly without interfering with the process. Of course, this means that any such trading clients have to be traders with large amounts of cash to cover the liquidity required to sustain the direct market access environment. Traders thus get pricing from several providers. The brokers do not act as counterparties to the trades. This is what gives trading with an ECN forex broker the reputation it has acquired in terms of transparency. The process eliminates all forms of conflict of interest as the broker is no longer the counterparty in the transaction.

The ECN forex broker is just a facilitator – creating the environment that brings opposing traders against each other and the liquidity providers.

ecn forex process

 

Advantages of Using ECN Forex Brokers:

There are many advantages to using an ECN forex broker.

a)    The market is highly liquid, so spreads do not widen unnecessarily.

b)     There are no requotes or slippages.

c)     Executions are a lot faster than in market maker platforms.

d)    News traders and scalpers can use ECN forex brokers because of the all-inclusive nature of their business.

 

Disadvantages of Using ECN Brokers:

Two main disadvantages of trading with an ECN forex broker exist.

a)    The capital requirements of opening a true ECN account are extremely high and out of the reach of most retail traders. It is not unusual to see account opening fees of a minimum of $10,000 and sometimes as high as $50,000 being stipulated.

b)    Traders have to pay commissions for opening and closing their positions. Simply put, it costs more money to trade with an ECN forex broker.

If you are unable to meet these requirements, you may consider using a MT4 bridge software, which combines the executions and order placement process on an ECN forex broker platform and that of the MT4 to create a perfect alloy of strategies.

Examples of platforms offered by ECN forex brokers are the cTrader, and Currenex Classic software.

 

Caution

Traders should be wary of brokers who come posing as ECN forex brokers, but still allowing traders to open accounts with ridiculous minimum deposits. From what has been described above, there is no way an ECN broker will ask a trader to open an ECN trading account with anything less than $10,000.

Trading in a true ECN environment with a true ECN forex broker is expensive business. Avoid these charlatans who lure unsuspecting traders with promises of ECN environments, but still use dealing desks in executing trades.

 

Conclusion

It is also possible to have a market maker providing an ECN platform that is distinct from their market making product offering. The comparison table below shows you the various ECN forex brokers that are available in the market.

 

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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