ECN Forex Brokers

Best ECN Forex Brokers

This is the list of what we believe are the best ECN forex brokers:

  • Pepperstone – Best Overall ECN Broker 2021
  • XM – Best ECN Forex Trading Broker for Beginners 2021
  • FP Markets – Best for Scalping and EA ECN 2021
  • Admiral Markets – Lowest Spread ECN Forex Broker 2021
  • Exness – Best MT4 ECN Broker 2021

What is ECN ?

ECN stands for Electronic Communications Network. ECN Forex Brokers who use these networks can automatically match their clients’ orders to matching orders from other clients or liquidity providers (tier 1 banks). ECN is a non dealing desk bridge with straight-through processing execution.

The Electronic Communications Network is a digital system that forex brokers use to automatically match buyers and sellers in financial markets seeking to trade securities. They speed up efficiency since the digital system quickly matches traders, making it easier for them to enter or exit positions while adding costs and risks to trading.

The digital system allows traders from different geographical locations to interact swiftly and collaborate despite long distances.

What is ECN Forex Broker & Trading Platform?

ECN Forex Brokers are intermediaries between clients’ buying and selling orders, they give traders a more transparent trading environment than other types of exchanges.

The best ECN forex brokers will abide by the regulations of reputable financial organizations. Depending on the location of the network, there are specific, established rules that ensure reliability. Checking commissions and trading fees help verify their legitimacy as well.

Many allow people to use a demo account before committing to using any platform. It’s a tangible way to see how a platform works and get familiar with it. ECN Forex Brokers with 24/7 customer support are more likely to be trusted than those without round-the-clock support.

Benefits of Electronic Communications Networks

ECN brokers do not trade against clients, and they do not profit from clients’ net losses. Since they automatically match clients’ orders and pass net orders to liquidity providers, there is less chance for conflicts of interest between brokers and clients.

They also typically offer lower spreads, thus providing a lower cost of trading for clients seeking to trade large amounts.

Due to their digital mode of trading, clients also get the opportunity to trade outside of traditional trading hours. Since everyone uses the same feeds, it eliminates price manipulation as there is more transparency.

Disadvantages of Electronic Communications Networks

One of the downsides of working through this system is the access fees and commission charges that increase the overall price of use.

Another disadvantage is that the digital platforms are not as user-friendly as traditional brokers’ platforms. Beginner investors may struggle to understand due to the lack of integrated charts. It is also more challenging to calculate break-even points due to wider spreads.

Trading with ECN Trading Platform

In forex trading, the electronic communications network connects retail forex investors with brokerages. Once they log onto the network, investors can see the best available bid and ask for quotes from various market participants. The electronic network automatically allows this matching.

When significant events move the market, ECN trading can be less liquid. During these times, brokers tend to present large price jumps on their feeds. They make money through the volume of their clients as they charge commission for positions.

Any trading activity on the network is completely anonymous; therefore, prices dealt represent the real market condition. These neutral prices do not slant against traders’ current market positions or strategies. They are automated, anonymous, and cut out the middle man for traders.

What to Look For in ECN Brokers

  • Experienced with at least two years in business
  • Transparent about the regulations they follow
  • Provide past clients’ reviews
  • Offer variable or floating spreads

It is always good to look at established, serious brokers with good reviews and reputations. You also can distinguish between traditional and ECN brokers as the latter do not have dealing desks. Negative slippage is an indicator of a non-ECN broker.

To open a trading account, you can create an account on an ECN trading platform like Pepperstone, FP Markets, Exness, and GO Markets. Practice using interfaces before signing up to figure out which works best for your needs. Searching through popular ECN brokers is a good place to start since you can see what features contributed to their success and popularity with traders.

Regulations

ECN brokers must register as broker-dealers. In the U.K., they follow regulations enforced by the FCA Financial Conduct Authority, in South Africa they follow FSCA, in Australia ASIC.

International ECN brokers have specific regulations enforced by the government of where they operate. Not all areas have the same regulations.

Bottom Line

ECN brokers allow clients access to direct market operations through automated, anonymous digital matching. Advantages of using them include transparency, lower spreads, and lack of price manipulation. Disadvantages of using them involve less user-friendliness than traditional brokers’ platforms and high prices of commission. If you are looking to trade using a more efficient approach that cuts out the middle man, then ECN brokers may be the choice for you.