ECN Brokers
The best true ECN brokers combine fast executions with tight spreads for a competitive trading experience. This guide will cover the meaning and definition of ECN only brokers – explaining how they work for aspiring forex traders. We also list the top ECN trading accounts in 2024 to help you get started.
Brokers With ECN Accounts for United States
ECN Brokers Explained
Electronic Communications Network (ECN) brokers give clients direct access to other traders in currency and equity markets. They consolidate quotes from various market participants, allowing them to offer customers the most competitive price. Importantly, investors do not trade against the broker, unlike with the market maker model.
The key benefit of ECN firms is tighter spreads, with some true ECN platforms even offering zero-pip spreads. To turn a profit, brokerages usually charge a fixed commission per transaction, giving traders upfront visibility of costs.
Pure ECN providers commonly trade forex and equity markets, however, some accounts offer access to CFDs and binary options too. The top providers accept US clients, as well as traders in various other countries from Singapore and Dubai to the Philippines and Kenya. Among the best ECN brokers in 2024 are IG, RoboForex and XM.
How ECN Brokers Work
ECN platforms are Non-Dealing Desk (NDD) brokerages. This means that instead of passing orders to market makers who take the buy side of your sell position, for example, they connect you directly with competing traders. If two parties cannot be matched, the platform offers the highest bid and lowest ask price available in the open market.
ECN brokerages also facilitate orders outside of standard trading hours. For retail investors with commitments during traditional trading windows, this is a real advantage. In addition, ECN accounts offer anonymity, meaning prices mirror live market conditions instead of being calculated or amended based on particular trading strategies.
ECN Brokers Vs Market Makers
Market makers take the opposing side of clients’ trades – setting the bid and ask prices. These prices are then displayed on their trading platforms where clients can execute positions. Importantly, market makers earn money when investors lose capital, creating a potential conflict of interest.
ECN platforms, on the other hand, give investors direct access to other traders. This arguably provides forex investors, for example, with lower prices and more competitive trading conditions. ECN brokers are also more transparent. They earn a commission on every trade, so they make money when traders open winning and losing positions. This means they are never betting directly against you.
ECN Brokers Vs STP Brokers
The Electronic Communications Network (ECN) and Straight Through Processing (STP) models are similar. STP brokers are also Non-Dealing Desk brokerages. They list trades that are sent to different liquidity providers, such as hedge funds and large banks. As with ECN brokers, these providers act as counter-parties for trades and compete to offer the best price.
The main difference between ECN and STP brokers is how the trades are routed. STP brokers can choose to deal with liquidity providers outside of their liquidity pool, whereas the ECN acts as a central hub. This hub is the primary source of liquidity.
ECN and STP brokers both provide lightning-quick executions with tight spreads, alongside a fixed commission per lot. Both models also suit a range of swing trading strategies.
Advantages
The main benefits of trading with ECN accounts include:
- Leveraged trading opportunities
- Ultra-fast execution speeds
- Extended trading hours
- Transparent pricing
- Highly regulated
- Tight spreads
Disadvantages
Drawbacks of signing up for an ECN trading account include:
- Volatile trading markets such as forex can lead to rapidly widening spreads
- Higher minimum deposit requirements
- Commission on every trade
Comparing ECN Brokers
Ranking ECN accounts can be tough, with many options for forex, equity and other assets. Use these factors to compare providers:
Fees & Spreads
ECN brokers will display a difference between the ask and bid price, known as the spread. Ideally, you want to use brokers with the lowest spreads. However as outlined above, this is not the only way platforms make money. They also charge a commission, usually between $2.50 and $5.00 per trade. Ask yourself – what is the total of both the spread and commission charged? This will help you find the cheapest brokers.
Minimum Deposit
Beginners may want to choose a provider with a low minimum deposit requirement. Forex.com, for example, accepts clients that make a payment of 100 units of their selected base currency. Pepperstone, on the other hand, requires 200 units of your base currency but offers more sophisticated trading tools and extras.
Leverage
ECN brokers usually offer margin trading. This allows you to increase your position size by borrowing funds from your broker, also magnifying potential returns. The best true ECN brokerages allow clients to trade with high leverage with RoboForex offering rates up to 1:2000.
Note, leverage at some brokers is limited by regulatory restrictions. For example, the CySEC caps leverage rates to 1:30 for retail investors.
Accounts
ECN brokers tend to offer various account options. True ECN accounts typically require a larger initial deposit in return for lower fees. New traders may also want to open a demo account to test ECN trading conditions with virtual funds. Micro accounts allow newer traders to invest in smaller amounts. Finally, if you want to trade in a particular currency, for example ZAR, look for accounts that support clients from South Africa.
Trading Platforms
There are many different trading platforms out there. ECN brokers may support one terminal or allow you to pick between several options. MetaTrader 4 (MT4), MetaTrader 5 (MT5) and cTrader are all highly rated and integrate well with ECN trading conditions. They also offer extensive technical analysis tools and rapid order executions.
Regulation
The best ECN firms are regulated by top-tier bodies. This adds a level of protection for customers while holding brokers to a high standard. If you are trading with ECN brokers in the UK, for example, they should be regulated by the Financial Conduct Authority (FCA). If you are in the EU, they should hold a license with the Cyprus Securities and Exchange Commission (CySEC). For Aussie investors, look for firms regulated by the Australian Securities & Investments Commission (ASIC).
Bonuses
ECN platforms may offer sign-up bonuses to entice new customers. There are companies with no-deposit bonuses and those with alternative promotions, like loyalty rewards. Interactive Brokers, for example, offers ECN cash rebates. These deals can all help boost your capital when you start trading. Just remember to check withdrawal terms and conditions before you sign up.
Getting Started
If you want to start trading with an ECN broker, follow this step-by-step guide:
- Open an account: The first step is to open and fund your account. Use our comparison guide above to find a good option.
- Research the market: With your account opened, take time to research the forex pairs that you’re interested in. Utilize technical indicators and charts to find suitable opportunities.
- Open a position: Once you have found a trade, open a position. You should receive the benefit of tight spreads, just make sure you factor in the commission.
- Monitor and close: With your position opened, you just need to wait for your exit point. Monitor the market, and when it is favorable and/or in line with your strategy, close the trade and take your profit.
Bottom Line on ECN Brokers
ECN brokerages offer multiple benefits. With transparent and tight spreads alongside instant market access and leveraged trading opportunities, they are popular with experienced forex and stock traders. True ECN providers also don’t trade against you, unlike the market maker model. Use our guide to understand how to identify ECN brokers and see our list of top brands for recommendations.
FAQ
Which ECN Broker Has The Highest Leverage?
Are There ECN Forex Brokers Accepting US Clients?
Yes – several ECN brokers accept clients based in the USA with Forex.com often topping the rankings in 2024. Platforms normally provide access to major US stock markets like the NASDAQ.
Who Is The Best ECN Broker?
There is no simple answer as to who is the top ECN platform because investors have different requirements. Use our comparison guide above to find the right option for you.
Is Interactive Brokers An ECN Broker Or Market Maker?
Are ECN Brokers Safe?
ECN brokers, as with all trading platforms, offer opportunities to generate profits from the financial markets. However, there is always a risk of losses, even with regulated and reliable firms. As a result, it is important not to risk more than you can afford.