ECN brokers attract attention because they offer direct market access, eliminate conflicts of interest with traders, and often reduce trading costs by charging volume-based trading commissions on top of tight spreads.
To test these various brokers, we opened a live trading account and deposited some money. As part of our testing, we confirm their status as an ECN broker by studying their client agreements and reviewing their trading fees to ensure they always have variable spreads with additional commissions. We can verify that there is no trading desk, that we experienced slippage, both positive and negative, and that no trading restrictions were in place. Here is the best ecn broker in the world, by comparison, and how to identify them.
What is an ECN Broker?
ECN brokers connect traders to a network of liquidity providers, unlike Market Maker/Market Movers brokers who carry out trades on their books.
ECN stands for Electronic Communication Network. ECN brokers sit at the center of this communications network, like spiders in a web. Other network members are liquidity providers such as banks, hedge funds, and other brokers such as the iq option.
Whenever a client makes a trade with an ECN broker, it collects prices from members of this network and provides traders with the tightest spreads that can be found to meet volume requirements. Because the liquidity providers on this network compete for your trades, ECN brokers usually offer very tight spreads that can be close to 0 pips.
How to compare the Best ECN brokers
ECN brokers use a high-speed network to find the best available prices and execute trading orders as quickly as possible. Where an ECN broker gets its market price and how quickly it executes trades should always be a consideration, along with other, more standard broker metrics. When comparing ECN brokers, always consider:
Trading fees: Traders look for ECN brokers because of their low trading fees. Trading fees on ECN accounts are a combination of spreads and commissions. The trading fee for one lot of EUR/USD at an ECN broker will range from 6 USD to 18 USD, depending on the trading conditions of the broker.
Execution quality: A combined metric used to discuss execution speed, slippage, and rejection rate, execution quality describes the relationship between a broker and the market and will directly affect the level of control traders have over their positions. A high-level ECN broker will have a high execution speed, which results in less slippage in price between the moment the order is executed and when it is opened, and less rejection of orders due to unavailable counterparts. Better execution quality will result in fewer accidental losses.
Place of execution: ECN brokers are never partners for client trades. Instead, it uses its network to trade with third parties. This third party is called the place of execution. The more execution places an ECN broker has, the more competition there is for its clients’ trades, leading to lower spreads and lower overall trading costs for traders.
Tradeable Assets: A good ECN broker will offer clients a large number of Forex Pairs and other CFD assets to trade. Having a limited set of trading assets can harm traders, as they will miss out on trading opportunities.
Regulation: Regulators monitor the activities of brokers and trading desks. Unregulated ECN brokers carry a lot of risks as there is no way to tell if they are ECN brokers without making a deposit and opening a trade. Brokers regulated by FCA (UK), ASIC (Australia), or MAS (Singapore) have a better reputation for law enforcement and thus ensure their member ECN brokers strictly follow protocols designed to protect their clients and their trades.
Trading tools: Free Virtual Private Server (VPS) services can guarantee the high-quality execution offered by leading ECN brokers. Other trading tools offered by best ecn brokers include indicator packages to help with automated trading and market analysis tools in platforms such as Trading Central or Autochartist.
How to identify an ECN Broker?
There are several ways to tell the difference: ECN brokers will describe their execution model in their legal documents, ECN brokers will always have variable spreads, ECN brokers will have no trading limits (trade size, stop-loss limits, scalping or hedging restrictions), and traders with ECN brokers will experience both negative and positive slippage. See also the points on How to identify the following ECN Brokers:
Read Broker Agreement
All regulated brokers are required by law to publish a Client Agreement and Order Execution Policy that sets out their method of execution. Some ECN brokers will also act as Market Move brokers under certain circumstances, so this is not an always easy method to determine the type of broker. See below for an excerpt from Pepperstone’s execution policy indicating that they are an ECN broker.
Pay Attention to Trading Limits
ECN brokers will never limit your trading methods or trade size. This means that all automated trading, scalping, hedging, and large order sizes (from 5 lots or more) will all be allowed. If a broker restricts any of these, then they are not an ECN broker.
Slippage will be Positive and Negative
The difference between the execution price and the order when it was submitted It can be called Slippage. Slippage is a normal aspect of trading with an ECN broker, especially for orders of larger sizes and during times of thin liquidity or volatile market conditions.
Slippage can have both a positive and negative impact on your trading position. If it turns out that you are experiencing only negative slippage, then your broker is not using the ECN execution method.