ECN Broker List Definition and Top Broker List

When buying or selling financial assets, there is always a spread differential between the best available buy and sell prices. A buyer needs to pay the best available sell price offered (the “ask”), while a seller must take the best available buy price (the “bid”). Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. One of the biggest drawbacks to using an ECN is the price to pay for using it. Typically, the fees and commissions for using an ECN are higher as compared to non-ECN systems.

This also provides greater certainty of execution, that you’ll come to appreciate when markets are volatile. The introduction of ECN trading was a milestone for the modern forex industry. With direct access to liquidity providers, automatic order execution and matching, it has become the way forward for many forex traders around the world.

Prices reflect real, live market conditions at that time with the ECN providing a level of privacy to those who need it, such as those executing large orders. Commissions vary depending on account types and depend on initial trading capital. RoboForex offers Forex, Stocks, Indices, ETFs, Commodities, Metals, Energy Commodities, and Cryptocurrencies. XM is next on our list and, just like IC Markets, is not an actual ECN broker. When picking an ECN broker, you should consider many factors, including regulation, security, fees, speed of servers, VPN availability, and more. This is ideal for those of you that require advanced chart reading and drawing tools, as well as the ability to deploy automated robots.

ECNs are likely to attract more informed orders than uninformed ones. This contradicts the general trend where secondary markets usually attract less-informed orders. Last but not least, you’ll also want to consider trading platforms when comparing brokers.

If you thrive by employing scalping techniques, EA assistants, or automated trading robots, then there is no question that an ECN environment is best suited for your needs. Classified by the SEC as an alternative trading system (ATS), an ECN makes money by charging a fee for each transaction to meet financial obligations. It attempts to eliminate the third party’s role in executing orders entered by an exchange market maker or an over-the-counter (OTC) market maker and permits such orders to be entirely or partly executed. Orders placed through ECNs are usually limit orders, which is particularly useful for safely trading after hours, given the volatile effect that can have on a stock’s price. An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market. ECN trading is especially helpful when investors in different geographic areas wish to complete a secure transaction without the use of a third party.

Thus, traders can enter or exit positions in the market at more favorable prices than what will be available through a dealing desk broker. Dealing desk brokers usually offer higher bid and ask spreads, as they make their money by pocketing part of the spread for themselves. The ECN provides an electronic system for buyers and sellers to come together for the purpose of executing trades. It does this by providing access to information regarding orders being entered, and by facilitating the execution of these orders. The network is designed to match buy and sell orders currently present in the exchange. When specific order information is not available, it provides prices reflecting the highest bid and lowest ask listed on the open market.

Trading Instruments

Because they do this in real-time, traders receive the same prices from the price feed. In summary, a forex ECN broker uses the MT4 or MT5 trading platforms, and manages ECN trading as a ‘hub’, where all the major market players act as a liquidity source. The broker uses this network to provide its clients with direct access to other participants in the market. ECN brokers are considered the best for forex scalping as they provide direct access to liquidity providers.

• ECNs allow for clients or investors to be able to participate and facilitate trades in market exchanges, outside the normal trading hours.
• With more than 90 forex pairs on offer, you will have access to a full selection of majors, minors, and exotics.
• Read as many reviews and articles about your broker before committing your money.
• When specific order information is not available, it provides prices reflecting the highest bid and lowest ask listed on the open market.

Thomas’ experience gives him expertise in a variety of areas including ecn broker investments, retirement, insurance, and financial planning.

Difference Between ECN, STP, and Dealing Desk Broker

They pass orders from traders directly to liquidity providers in the market. Unlike ECN brokers, they do not provide traders with a massive list of all compatible liquidity providers in the market. As a general rule, ECN brokers charge commissions for each trade placed. The ECN pricing model might favor traders with higher trading frequency and volume, while it might be more expensive for low-volume retail traders. 77.74% of retail investor accounts lose money when trading CFDs with this provider.

Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Traders from United States are able to trade only with Forex brokers registered with CFTC or NFA in US. Some of the regulated ECN brokers for US are Forex.com, IG and ATC Brokers.

You will also have the option of using popular third-party platforms MT4 and MT5. The term market makers refers to high-volume traders that literally “make a market” for securities by always standing at the ready to buy or sell. Unlike ECNs, market makers profit on the bid-ask spread rather than through commissions and fees. An ECN broker only matches trades between other market participants; it cannot trade against the client.

This means traders get fast executions, no broker interference, best available prices and no slippage. They link traders with liquidity providers who offer various positions. Based on your trading volume and needs, you should determine whether an ECN account is beneficial. You can get started in minutes, and minimum deposits start at just $10. Best of all, you will not be accustomed to any spreads when trading via your ECN account.

Call markets accept orders one at a time, with buying and selling prices determined based on the exchange activity after the order is placed. Depth of market shows you the liquidity available for every bid and offer. DOM should be available for every instrument and change dynamically as orders are filled and new orders come to market.

However, forex trading does not occur through exchanges like stocks are traded, but through an over-the-counter market via which buyers are connected with sellers. Most ECN brokers earn money through a commission on trades rather than a mark-up on spreads. This is why they typically quote spreads as lows as 0 pips, also known as “raw spreads”. FP Markets is an exception to the rule in that it allows you to choose between a commission-based and a commission-free account. An ECN account link traders through a decentralized network to liquidity providers to execute trades. While IC Markets isn’t a True ECN broker, they offer an ECN environment pricing model.

These fees are calculated on a per-trade basis, so can be costly over the long-term. An ECN broker is usually a No Dealing Desk (NDD) broker, which means that the clients’ orders do not pass through a Dealing Desk, which enables execution in a direct connection between the parties. Dealing Desk brokers will not allow scalping because of the calculating power needed to facilitate thousands of short-order trades. Every day, traders are becoming savvier about the unsightly business practices that some Dealing Desk brokers engage in. Because of this, many DD brokers try their best to make it appear that they are ECN brokers.