ECN Forex brokers list
The Forex brokers world has experienced in the past few years a surge in the growth of new pure breed of brokers called ECN (Electronic Communication Network) brokers. They allow clients to interact directly with each other. An ECN Forex broker executes a client’s trade order by matching it with that of clients on the other end of the trade or interested third parties.
Selecting the most suitable ECN broker out of the several options can be an uphill task even for experts. The fact that some traditional brokers also provide ECN-type of accounts besides other trading accounts complicates matters further. In the table belo, you can find a review of ECN Forex brokers and all the information you need to know to choose the best one one.
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|Company||#||Logo||Forex broker||Founded||Regulated||Reviews||Payment systems||Broker type(?)||Min. Deposit||Max.|
|Accepting US traders?||Account|
|17||Dukascopy Bank SA||1998|
|29||Fort Financial Service||2010|
|50||Key to Markets||2010||6|
Comparing ECN Forex Brokers and Other types of brokers
You will find the terms STP (straight through processing), NDD (No-dealing-desk) used in some instances to refer to ECN brokers. While the two terms apply to unique aspects of the ECN, there are significant differences between them. Below is a quick highlight of the different types of Forex brokers in the industry.
ECN brokers (current list)
Dealing desk brokers are also known as market makers because they create the market. They always stick to the complementing side of a trade by buying from traders who are selling and selling to traders who wish to purchase. The trader cannot see the market prices. Hence these brokers can manipulate the costs to meet their interest.
These brokers allow traders to directly access interbank markets by eliminating the dealing desk. The benefits of such platforms are that they do not restrict trading during trading news times, eliminates repeated quotes and additional pausing in the order confirmation process. The broker can make money by widening the spread or charging a commission. STP and ECN+STP brokers both fall in this category.
Traders on an STP platform can access market quotes as well as close trades without the intervention of a dealer. The brokers in this platform directly forward orders to their liquidity provider, which can be banks or traders. Having several such providers increases the overall liquidity of the system. It leads to faster execution of trade orders. However, it is common to find a broker that has only one liquidity provider.
They operate in an NDD environment. All participants, traders, and banks, can interact on the platform. They create competitive bids amongst themselves and settle for the most suitable deals available at the given time.
An ECN Forex broker is not counterparty to the transaction. The broker merely facilitates the process by bring opposing traders together. Such a structure eliminates chances of conflicts of interest for which DD Forex broker platforms are known.
The main difference between an ECN and STP is that a real ECN has Depth of Market functionality. The DOM gives the players a view of the available orders and their costs. They can then execute the trades that they find to be most competitive.
Unique Features of ECN Forex Broker Environments
Here are the five unique features of the ECN environment that are worth knowing before trying it out.
Who fits in
ECN brokers are only for big players who have the capital to invest. It comes out in most of its requirements such as limitation son deposits and trade sizes. It is, therefore, most suitable for seasonal Forex traders.
The standard account size in the Forex world is a microlot (0.01 of a slot). ECN Forex brokers, however, require higher deposit amounts with some insisting on one minilot (10 microlots).
Minimum trade size
ECN might not be the best place for people who prefer trading in microlots. Most of them have one minilot as the minimum trading size. Fortunately, there is a growing number of ECN brokers that allow microlot sizes.
Maximum trading sizes
Limits on the maximum trade size level is common on market making platforms. However, since it is a big-players-only environment, ECN brokers allow very high trade sizes. This is because the processing of the orders does not involve a dealing desk.
Spreads on ECN platforms are always changing. They can vary widely and sometimes surpasses what most market makers are accepting at the time. The variation of the spreads is affected purely by the market dynamics of demand and supply.
The primary advantage of DD brokers over ECN Forex brokers is the vast variety of choice instruments they offer. ECN brokers will first prove the stability of the instrument before offering to trade in it. The smallest trade size requirement on non-Forex options by the NDD brokers is also very high. It is, therefore, not a suitable option if you wish to diversify into shares, stocks, and commodities.
ECN brokers are reputable for their fast transaction execution speed, which sometimes takes seconds. Nevertheless, like all Forex brokers, there are times of low liquidity when no one wants to buy or sell. It usually occurs during trade news releases, when the result goes against the general expectation of most participants. Such cases result in longer delays than it would be with market makers.
ECN Trading Bridging software
The software platform varies from one ECN broker to another. However, there are only three main options to choose from, Meta Trade 4/5, cTrader and Currenex. It is impossible to cleave out the best choice among the three because they have different strengths and weakness. Since most ECN brokers use more than one platform, you need to know how to select the best software. Here are hints to go by:
cTrader and Currenex Viking are the most reliable software for ECN trading. Meta Trader 4 or 5 were primarily for non-ECN brokers. However, there is an ECN MT4 in the industry, and it is worth trying out.
MT4 is the most available software with an established open source and online community. However, this is from a general view of the Forex industry. In truth, ECN MT4 is a late entrant with little online community. cTrader is the outright winner among the three regarding use and availability.
The depth of Market Functionality
The first Meta Trader software with DOM functionality is the MT5. However, it is still rudimentary. cTrader and Currenex Viking come with a better feature.
Level of experience
cTrader and MetaTrader4 are for the experts. cTrader even has supporting programs for sophisticated trading such as cAlgo and cMirror. Experts use cAlgo for algorithmic trading. Currenex Viking on the hand is an excellent tool for beginners in the ECN environment.
How to Filter Fake ECN Forex Brokers
The popularity of ECN brokers has led to an increasing number of brokers labeling themselves and such or claiming to offer ERCN-type of accounts. It is therefore crucial that you understand how to discern fake from real. Here are a few tips
Check the spreads
Spreads in an ideal ECN broker are dynamic. A broker that has nearly fixed spreads and slow executions is undoubtedly not an ECN broker.
The first question that bank traders asked during the launch of the pioneer ECN Forex broker was the possibility of banks accepting to process direct microlots. The truth is that this level of execution is only possible for ten or more full slots. It would take longer to attain this threshold if an ECN Forex broker accepted microlots or smaller trade sizes.
Any broker that accepts such low minimum sizes has to have a dealing desk for the bucketing of the orders. It, therefore, ceases to be a real ECN broker.
Sometimes, knowing what happens behind the scenes might not be essential. Such is the case when you have the certainty that the brokers are matching the orders directly and the execution speed is acceptable.
The liquidity provider
The liquidity provider ought to be a 1 tier investment bank. Most of the fake ECN brokers have their dealing desks acting as the liquidity provider. Most of them do not reveal their liquidity provider to traders. If you have to push to get this information, then the broker is market maker with an ECN façade.
How to Select the Most Suitable ECN Forex Broker
There exists over 100 known legitimate ECN Forex brokers in the industry today. The procedure for choosing the best among these is similar to selecting any traditional broker. ECN brokers rarely provide misleading information. This is because their target market is more sophisticated than that of market making brokers. Consequently, some of the best ECN Forex brokers have poor advertisement services.
The three essential features to consider are:
Regulations that ensure deposit safety
Bonuses and promotions
Selecting brokers based on location should be the first step when filtering out suitable options. You can choose brokers that operate within your country of residence or that uses a language you understand. Other factors to consider are restrictions and tax legislation. UK residents, for example, would go for ECN brokers with special spread formats to avoid paying taxes on the earnings. In case you reside in the US, your choices are limited due to the restriction on Forex trading.
Regulations that ensure deposit safety
A wise investment scheme is one that assures you of the protection of your capital. Such might not be the concern of those who wish to put in only a small capital that they do not mind losing. However, since ECN is for big players, one needs to have an assurance of the safety of their deposits.
The first step of narrowing your list is by avoiding all brokers located in countries, especially islands you are learning about for the first time. Instead, focus on the reputable broker options within your desired location.
Some countries such as the UK protect investors’ deposits to regulated brokers. Registering with such government-backed brokers assures you of getting back your deposit in case you get bankrupt or the broker collapses. Such a structure is critical if you intend to make a substantial investment in ECN Forex trading.
Bonuses and promotions
It is important to tread softly when dealing with the enticements that brokers freely dish out to new traders. It is important to read the terms and conditions to decide if it will be economically beneficial to claim the bonus. Most of these incentives will make it impossible for you to withdraw a part of your deposit until you meet a specified trading threshold.
One more factor you would probably want to consider is the trading platform. You can choose cTrader, MT4 ECN or Currenex Viking depending on your preference and level of expertise.
The Pros and Cons of ECN Brokers
ECN allows investors to trade outside the regular trading hours. The flexibility makes it suitable for those who prefer to trade for long periods or are not available during the regular trading hours.
A key benefit sets ECN apart from market making brokers is its promise of transparency. All the participants in the system have access to information on the available orders and the prices. ECN platforms also provide price history, which makes it easy to analyze the trends in the market. It also eliminates the possibility of price manipulation.
Most ECN brokers have more than one liquidity provider. It controls the spread from widening to unnecessary levels.
Little or no slippages
Trading on ECN platforms continues unrestricted even during news release time. The continuity minimizes possible slippages that are common in DD broker platforms during such hours.
The minimum account deposits for ECN is very high ranging from $10,000 to $50,00
Trading on ECN costs more than in other traditional Forex platforms. The brokers charge a commission on each trade and inevitable additional fees. The high charges affect your profit and bottom line.
An ECN broker provides a faster and transparent Forex trading for experts and big players. However, it is essential to watch out for unscrupulous brokers that allow opening accounts with incredibly low deposits. Creating a real ECN environment is expensive. Therefore, any broker that asks for a deposit lower $10,000 should be dealt with cautiously. Additionally, it is worth remembering that this part of the industry is suitable for high rollers and experts.