Who is an ECN Broker, and Why are they Important? - Learn to Trade
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Who is an ECN Broker, and Why are they Important?

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Michael Fasogbon

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Over the past decade, retail forex trading activities have come a long way, mainly due to the resolve of the brokerage community to act as middlemen between the global interbank market and individuals.

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When you look at the nineties era and before, forex trading was limited to large financial institutions, hedge funds, and wealthy individuals. The entry requirement at the time was roughly 1 million US dollars.

ECN Broker

Following these conditions, forex brokers learned how to arbitrage their risk from their liquidity providers, aggregate their client orders, and offer bid/ask quotes for smaller lot sizes.

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1+

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Recommended

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Total cost

$ 0 Commission 3.5

Mobile App
10/10

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$100

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100

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EUR/GBP

-

EUR/USD

-

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0.3

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0.2

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0.0

GBP/JPY

0.1

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0.3

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Continuous rate

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Regulation

Yes

FCA

No

CYSEC

No

ASIC

No

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No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 0

Mobile App
10/10

Min.Deposit

$100

Spread min.

- pips

Leverage max

400

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50

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Demo
Webtrader
Mt4
MT5
Avasocial
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Funding Methods

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CYSECASICCBFSAIBVIFSCFSCAFSAFFAJADGMFRSA

What you can trade

Forex

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Actions

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EUR/GBP

1

EUR/USD

0.9

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

Yes

CYSEC

Yes

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

Yes

CBFSAI

Yes

BVIFSC

Yes

FSCA

Yes

FSA

Yes

FFAJ

Yes

ADGM

Yes

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 6.00

Mobile App
7/10

Min.Deposit

$10

Spread min.

- pips

Leverage max

10

Currency Pairs

60

Trading platforms

Demo
Webtrader
Mt4

Funding Methods

Credit Card

What you can trade

Forex

Indices

Cryptocurrencies

Average spread

EUR/GBP

1

EUR/USD

1

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

Your capital is at risk.

Rating

Total cost

$ 0 Commission 0.1

Mobile App
10/10

Min.Deposit

$50

Spread min.

- pips

Leverage max

500

Currency Pairs

40

Trading platforms

Demo
Webtrader
Mt4
STP/DMA
MT5

Funding Methods

Bank Transfer Credit Card Neteller Skrill

What you can trade

Forex

Indices

Actions

Raw Materials

Average spread

EUR/GBP

-

EUR/USD

-

EUR/JPY

-

EUR/CHF

-

GBP/USD

-

GBP/JPY

-

GBP/CHF

-

USD/JPY

-

USD/CHF

-

CHF/JPY

-

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

This move ushered in the era of retail forex trading, opening the doors of unlimited opportunities in the forex exchange market. Over time, the evolution of retail forex trading led to the development of ECN brokerage.

ECN (Electronic Communication Network)

ECN is a communication platform that is designed to provide a direct automated channel for transferring trading orders from an individual to a liquidity supplier.

ECN came about from the desire to minimize the number of go-betweens between two market players. Lack of trust and honesty between players called for an effective and efficient solution.

Introduced back in 1999, ECN has made major technological leaps to make itself more accessible to traders.

At present, traders who wish to trade via ECN only require to open a special account with a certified broker. Opening and operating such an account is as simple as opening and operating a regular account.

Who is an ECN Broker?

An ECN broker is a forex financial specialist who utilizes electronic communication networks (ECNs) to service his/her clients. ECN brokers have direct access to other participants in the forex currency markets.

Considering that ECN brokers integrate price quotations from multiple market participants, they generally offer their clients’ tighter and favorable bid/ask spreads.

Given the fact that ECN brokers are only mandated to match trades between market players, they are not allowed to trade against clients. Some unscrupulous retail brokers fall under such allegations.

ECN brokers charge their clients a fixed charge per transaction, given the fact that ECN spreads are much narrower than those of other brokers.

A big percentage of the forex market does not resort to the unscrupulous activities mentioned above, but it is important to take note as the temptation is ever-present.

New and upcoming ECN brokers are taking full advantage of clients’ concerns regarding security and propriety in their advertising activities.

Today, almost every ECN broker assures their clients or prospective clients of their commitment to never trade against them in the background.

How Does an ECN Broker Work?

ECN Broker

At present, many believe that ECN is the future of forex trading, mainly because it eliminates long processes and intermediaries in the forex industry.

As for how an ECN broker operates, consider them as a bridge that links the gap between large Tier-1 financial institutions and small retail traders.

The technology that makes the linkage possible is fairly complex and goes by the name of FIX Protocol or Financial Information Exchange Protocol.

A good ECN broker has many connections with major financial institutions and funnels your orders directly to their liquidity providers at the agreed spreads.

ECN brokers make their monies on a transactional and commission basis. The ECN brokers also have no mandate to control the spreads at any given time, rendering them to be accustomed to variable spread pricing.

Trading platforms for ECNs are usually more cumbersome and complex, forcing traders to take some time to get used to the platforms.

For potential traders with large account balances, and high trade activities, ECN brokerage might be the perfect way to go.

For retail traders who have smaller account balances and are unwilling to venture into high-volume trading, the market maker might be a good fit for their trading activity.

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