In this guide we will go over ECN Forex Brokers based on a variety of factors. An Electronic Communication Network (ECN) broker works by “cutting out the middleman” in trading. Where other types of brokers set their ask price for buying and selling securities, ECN brokers offer a straight through processing execution to clients.
Traders using ECN accounts can set the conditions for the trades they want to make such as choosing the type of instrument, spread, lot size, etc. Brokers then search through their database for providers who offer agreeable terms.
Brokers that do not use the ECN model tend to trade directly against their clients, taking the opposite position. Many traders have reservations about this practice because there is a potential conflict of interest. If the client wins, the broker loses, and vice-versa.
For example, using an ECN broker a trader decides they want to take a Forex position. They choose the lot size they want, eg. $1,000. The ECN broker will then search through thousands of liquidity providers to give that trader access to the position.
ECN brokers charge a commission on each opening and closing trade to make money, but they are not directly involved in either side of the trading process. They are considered a non-Dealing Desk, meaning that they only facilitate trades between two parties.
Best ECN Brokers 2021
We’ve made a list of some of the most reputable ECN brokers on the market today. When examining each broker we took several aspects into accounts, such as the level of regulation, commission charges, security, customer service, and more.
Here are our top picks:
- Interactive Brokers – Best ECN Broker Overall
- FP Markets – Best Forex ECN Broker
- Pepperstone – Best ASIC Regulated ECN Broker
- IC Markets – Trusted ECN Broker
- Forex.com
- HotForex
- Admiral Markets
- Dukascopy
- RoboForex
- LCG
- ADSS
1. Interactive Brokers – Best ECN Broker Overall
Interactive Brokers is one of the few brokers on this list that has been in operation since before the proliferation of the internet. They started in the UK are regulated by the FCA but have since added offices in the US, gaining SEC regulation.
Although they are considered highly reliable, using their platform can be complex and is not recommended for newer traders. There is no minimum deposit fee to open an account.
The trading platform provides lots of information, but it could be divided up better. As it is, users are presented with too much information at once which could become overwhelming for some.
| PROS | CONS |
|---|---|
| Loads of useful research tools | Complicated trading platform |
| No minimum deposit | Opening an account takes a few days |
| Low margin rates |
2. FP Markets
FP Markets is an Australian broker regulated by the ASIC. FP Markets solely trades in Forex and CFDs.
They support over 10 base currencies for accounts. Accounts can be opened easily with a relatively small minimum deposit.
The fee and pricing structure of FP Markets is where they stand out amongst competitors. There are no inactivity fees if your account becomes dormant, and they don’t charge a withdrawal fee.
| PROS | CONS |
|---|---|
| Access to a free demo account | Limited number of products |
| Regulated all over the world | Platform needs work |
3. Pepperstone
PepperStone is regulated by the FCA in the UK and the ASIC in Australia. They are not listed on any stock exchange, and therefore they do not have to release their financial statements to the public.
They offer leverage ratios of up to 500:1 to traders outside the EU. This is useful for traders looking to increase their margin but could potentially lead to large losses.
PepperStone uses proprietary software to execute ultra-fast trades with minimal slippage. The broker uses MT4, MT5, and cTrader platforms which gives clients access to hundreds of different instruments.
| PROS | CONS |
|---|---|
| Minimal inactivity fees | Research tools are limited |
| Free deposits and withdrawals | Trading CFDs comes with high commissions |
| Advanced risk protection and stop losses | Not available to clients in the US or Canada |
4. Forex.com
A brand of GAIN Capital, Forex.com is a globally regulated ForEx broker and CFD broker that was launched in 2001.
They offer nearly 100 ForEx pairs for trades to choose from, as well as over 400 CFDs speculating on a wide range of markets. The downside of this is that Forex.com only offers CFD and ForEx options.
The trading platform is clumsy and unclear. Additionally, traders do not have access to the fundamental market data which makes up their charts and graphs.
| PROS | CONS |
|---|---|
| Low Forex trading fees | Broker offers limited trading instruments |
| Variety of currency pairs | Trading platform is lacking |
| Excellent customer support |
5. HotForex
HotForex is a European ForEx broker regulated by CySEC in Cyprus. They launched in 2010 and have had a solid track record since.
They utilize both the MT4 and MT5 platforms and have their own suite of tools made to modify and enhance the standard MetaTrader experience. Traders can use the Premium Trader Tools to add connectivity to global economic news, manage alert alarms, and more.
They have a variety of commission-free, spread-only accounts as well as the “Zero” account, which charges commission. This is sure to fit any trader’s needs and demands from their broker.
| PROS | CONS |
|---|---|
| Broker offers a wide range of CFD and currency pairs | No Cryptocurrency offering |
| Social trading enabled platform | Not a publicly listed broker |
| Tight spreads and commissions |
6. Admiral Markets
Admiral Markets is an Estonian Forex broker. They are subject to the regulations of both the FCA and CySEC.
AM offers commission-free trading with over 4,000 assets so that traders can diversify their strategies.
Because of their excellent research and educational tools, Admiral Markets is placed as one of the top brokers for beginners.
| PROS | CONS |
|---|---|
| AM Uses segregated accounts for client funds | Deposit to open an account is high |
| Many choices of trading platform | No option for fixed spread accounts |
| Users have a free 21-day “Zero to Hero” course |
7. Dukascopy
Dukascopy is one of the few brokers operated from Switzerland. It is a subsidiary of Dukascopy Bank and is regulated by the Central Bank of Switzerland and the Swiss Financial Market Authority.
They provide access to a decent range of financial instruments, including CFDs, ForEx, commodities, and two cryptocurrencies. Traders using Dukascopy have a wide selection of securities to trade.
| PROS | CONS |
|---|---|
| Trades can use both demo- and Sharia-accounts | High minimum deposit |
| Supports numerous trading platforms | Website can be overwhelming |
| Advanced research tools |
8. RoboForex
RoboForex is an online retail broker regulated by the IFSC in Belize. They have been trading since 2009 and have accrued over 10,000 traders on their platform.
It has won many awards for excellence over the years, most recently the ‘Best Mobile Trading App’ from the Global Forex Awards in 2020.
With a minimum deposit as low as $10, traders have access to Forex pairs, CFDs, shares, and commodities. They also support a variety of deposit and withdrawal methods including BitCoin, Visa, and wire transfers.
| PROS | CONS |
|---|---|
| Users receive a monetary bonus for opening an account | Lacking regulation in many jurisdictions |
| RoboForex supports MT4, MT5, and cTrader platforms | High leverage ratios are risky for newer traders |
| Low minimum trade lots |
9. LCG
The London Capital Group – LCG – is regulated by the FCA and has a proven track record spanning several decades. They are one of the UK’s largest Forex brokers.
LCG prides itself on providing a seamless trading experience using MetaTrader 4 as well as their own trading platform to execute fast trades. In 2021, Investopedia awarded LCG their Best Broker for Beginners.
LCG’s spreads are highly competitive, and the ECN account has the best spreads on offer. Additionally, they offer guaranteed stop-losses at an extra charge.
| PROS | CONS |
|---|---|
| Offers lots of protection for client funds | Clients in the US are not allowed |
| Excellent platform for beginners | |
| Rebates are available for high-volume traders |
10. ActivTrades
ActivTrades is a Forex broker that was founded in the UK in 2001, regulated by the FCA.
ActivTrades are one of the cheaper brokers to trade with. Deposits and withdrawals are free. ActivTrades commission and fee structure is lower than many other brokers. But the minimum deposit amount is a bit too high.
ActivTrades facilitates Forex and CFD trading. One downside is that these are the only trading instruments available on the platform.
| PROS | CONS |
|---|---|
| Inexpensive trading fees | No choice for trading instruments |
| Highly Rated customer support | Minimum Deposit |
| A wide range of research tools |
11. ADSS
ADSS is based in the UAE and headquartered in Abu Dhabi. Since its founding in 2011, it has expanded, adding offices in Singapore, Hong Kong, and London. It is regulated by the Central Bank of the UAE.
ADSS offers services to a range of clients, from retail traders to institutional investors. They offer a host of CFD options and Forex pairs as well as cryptocurrency trading. They maintain a high level of cybersecurity management for their client’s data.
| PROS | CONS |
|---|---|
| Operates in a highly regulated jurisdiction | High commission and spread charges |
| Multiple languages supported | Account opening is complicated |
| Lots of research tools |
Benefits of using an ECN Broker
So now you know what an ECN is and how it works, but what are the advantages of using this type of broker offers? We’ve made a handy list to help you out.
Transparency
ECN brokers consolidate market prices from liquidity providers from all across the globe. Because they do this in real-time, traders receive the same prices from the price feed. Traders can use this information to compare data on lot prices.
This means that the broker cannot engage in price manipulation since the information is disseminated widely. Price and market manipulation is one of the largest concerns many traders have about their brokers.
Direct Trading
ECN brokers do not trade directly with traders. They link traders with liquidity providers who offer various positions.
One advantage of this is that traders can take positions instantly, rather than waiting for their broker to secure that position.
ECN brokers are not involved in either side of a trade, so they have no vested interest in the trader making or losing money.
Tighter Spreads
Because ECN brokers aggregate bid and sell prices from different market participants such as investment banks and hedge funds, they can offer lower bid-ask spreads than other types of brokers.
Acting as a hub for market players, traders will have access to liquidity providers asking for a range of prices. Some of these spreads will be higher than market standards, others will have lower.
Traders can choose the positions and spread that best suit them from thousands of providers from across the world.
ECN vs Market Maker
Market Maker brokers – also called Dealing Desk brokers – operate oppositely to ECN type brokers. Instead of decentralizing trade positions, they counter the trade that each trader takes.
Market Makers are liquidity providers. They decide both the bid and sell price that is displayed to traders. The only thing that keeps Market Maker brokers from massively inflating their prices is a highly competitive market.
Market Maker brokers make money on the spread (the difference between the bid and ask price) at either end of the trade as well as whatever profits they earn during the trade.
Institutions like banks and other large financial institutions are all Market Makers.
Difference Between ECN, STP, and Dealing Desk Broker
ECN and STP brokers are both examples of No Dealing Desk brokers. Essentially, this means they are not Market Makers and do not provide liquidity to their traders.
ECN brokers operate by linking traders through a decentralized network to liquidity providers to execute trades.
Market Maker or Dealing Desk brokers “make” a market for their traders by setting a bid and ask prices for instruments. They take the opposite side of each trade and provide liquidity directly to their clients.
STP brokers are another example of No Dealing Desk brokers. They are less common than ECN brokers, but many traders prefer them for secure trades. The differences between ECN and STP brokers may seem small, but they are crucial.
STP – Straight Through Processing – brokers do as their name implies. 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.
Using an STP model, traders are competing with other traders rather than with their own brokerage.
Sometimes STP brokers choose to absorb some or all of the liquidity from a trader’s position without passing it on to the interbank market.
How to tell if a broker is a fake ECN broker
Every day, traders are becoming savvier to 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.
Some traders using DD brokers have noticed that prices reported in demo accounts vary from those listed on their live accounts. This is a sign that your broker is playing dirty, trying to make their platform more appealing to potential clients.
There are several steps potential traders can take to protect themselves from these kinds of shenanigans, and in return protect their money.
Firstly, users should read through the client agreement thoroughly. It may seem like a chore, but in the user agreement, the broker should state clearly whether they utilize ECN or other No Dealing Desk accounts.
As tempting as it may appear, ECN accounts will not offer fixed spreads. By their nature, ECN brokers have to offer variable spreads as the liquidity providers may change their prices at any time.
Next, see what your broker’s terms are around scalping. We’ll cover exactly what scalping is later in this article, but to put it simply: it’s a trading strategy that relies on trading large volumes over very short timeframes.
Because scalping is carried out in minutes or sometimes even seconds, Dealing Desk brokers tend to disallow this strategy. ECN accounts can execute trades at ultra-high speeds and can facilitate scalping without much issue.
Lastly, it’s best to extensively research your broker. Read as many reviews and articles about your chosen broker as you can find before committing your money to it. You worked hard to earn it, it would be a shame to throw it away on a fly-by-night brokerage.
ECN and Scalping
One of the reasons ECN brokers are becoming so popular with day-traders is that they allow traders to use the scalping strategy. This term has earned an unfair association with people selling concert tickets at massively inflated prices, but it is a perfectly legal and ethical trading strategy that many traders use to maximize profits.
To use scalping as a viable strategy, traders should have access to tools such as live economic news feeds and accurate charting programs. It also requires quite a large time investment as placing trades at the right time is crucial.
Scalpers trade by taking positions for very short periods. They earn profits by buying and selling securities and taking advantage of minuscule gains between 5 and 20 pips. This relies on the idea that multiple small profits are easier to attain than singular large ones.
ECN brokers facilitate scalping because of their automated execution. Because ECN brokers act as intermediaries between trade parties, they can execute thousands of trade orders every second.
Dealing Desk brokers will not allow scalping because of the calculating power needed to facilitate thousands of short-order trades.
