ECN Forex Broker Comparison

ECN Forex Broker Comparison

ECN Forex Broker Comparison Table
Online BrokerMinimum ECN DepositMT4MT5cTraderJForexBroker vs Broker
Pepperstone$200
Minimum Deposit
MT4
MT5
cTrader
X
JForex
Z.com Trade$50
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
IC Markets$200
Minimum Deposit
MT4
MT5
cTrader
X
JForex
Titan FX$200
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
RoboMarkets$100
Minimum Deposit
MT4
MT5
X
cTrader
X
JForex
Dukascopy$100
Minimum Deposit
X
MT4
X
MT5
X
cTrader
JForex
ThinkMarkets$2000
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
XM$100
Minimum Deposit
MT4
MT5
X
cTrader
X
JForex
USGFX$100
Minimum Deposit
MT4
MT5
X
cTrader
X
JForex
AAAFx$300
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
FXCC$100
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
FXGiants$500
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
FXOpen$300
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
FXTM$200
Minimum Deposit
MT4
MT5
X
cTrader
X
JForex
IronFX$500
Minimum Deposit
MT4
X
MT5
X
cTrader
X
JForex
NSFX$3000
Minimum Deposit
MT4
X
MT5
X
cTrader
JForex

ECN Brokers And ECN Trading

The brokers in the table provide accounts which can have very low but variable Forex spreads with a commission charge added in no dealing desk conditions, on trading platforms such as MT4, MT5, cTrader and JForex. They can be compared in more detail broker versus broker, by features such as minimum deposit, commission charges, markets and platform. These brokers support both discretionary and automated trading.

Minimum deposit

The minimum deposit given in the table is for ECN accounts. The broker may have a lower minimum deposit for other kinds of accounts.

ECN trading

The potential advantages of ECN trading include speed of execution and the capacity to use a wide range of trading styles.

ECN FX

The brokers in the table all provide accounts which can have very low Forex spreads, depending on such factors as market conditions and liquidity, with a commission charge added.

Briefly, why use an ECN broker ?

ECN brokers aim to connect the trader with liquidity providers. So the idea is to get spreads as low as possible and orders as quickly as possible. While all traders may find this useful, traders who use automated trading strategies (robots), may find that this is suited to their trading, particularly, as is typically the case, if the broker does not restrict order styles (by not intervening in the order process). Thus strategies which may not be allowed or practicable at other brokers, should be possible.

Because the broker provides low spreads, does not mean they will be cheaper than a dealing desk broker, as the total cost of the trade is the spread plus the commission charge. ECN brokers charge a commission, because they are providing low prices from liquidity providers, to which the broker themselves adds an extra cost (so in effect this separates out the components of the cost of a trade).

Metatrader 5, cTrader and JForex

These platforms provide Level II pricing and other features which can be applicable to ECN trading.

ECN news trading

ECN brokers typically allow news trading (trading at or around the release of news, such as economic data), but it should be noted that spreads can widen around news releases.

ECN for scalping

ECN brokers typically allow scalping.

Automated trading

All of these brokers provide at least one platform which allows the trader to use automated trading strategies. These can be written by other traders or programmers or programmed by the trader themselves. It should be noted that because a strategy worked in the past does not mean it will work in the future. If the trader wants a strategy to run 24/7, when they are disconnected from the broker, they can use a Virtual Private Server (VPS).

ECN, STP, what does it mean for the trader ?

A core difference between an STP broker and an ECN broker, is that an STP broker has one liquidity provider (for example a prime of prime broker) to fill a client order. STP brokers may also typically use a B Book, that is they try and net an order with their own clients (match a buy with a sell and a sell with a buy order). An ECN broker on the other hand will have more than one liquidity provider. These Interbank providers can include banks (known as Tier 1 providers), other brokers, institutions, hedge funds and even dark pools (anonymous pools of capital). These providers, especially the banks, trade huge volumes with each other in the decentralised Forex market, filling large currency exchange orders (Forex has vast daily volumes, dwarfing other markets). This drives prices down, so liquid instruments can be offered at very low prices (the spread).

The retail trader does not trade on this market, but trades through a broker. Some brokers offer the capacity to more or less directly access this market (i.e. brokers which label themselves as STP or ECN or STP/ECN). Some brokers, especially STP brokers will include the cost of the trade as a spread, to be paid at the beginning and end of the trade, without a commission charge. Other brokers will quote ECN caliber prices, that is the kinds of spreads which can be seen in the Interbank market, aggregated by the broker from liquidity providers. So for very liquid Forex pairs (price being a factor of liquidity), prices as low as 0.1 pips could be seen. Sometimes lower prices can be seen, a Forex spread of 0 or less.

However this is not typically the full cost of the trade to the trader. The trader is charged also an additional commission charge, by the broker. So for example, a broker may charge a commission of $3 per lot per side. This means that in addition to the spread cost, $3 is charged at the beginning and end of the trade, per lot. Thus if the spread is 0, then the actual cost of a trade is 0.3 + 0.3 = 0.6 pips. This cost is charged irrespective of the length of the trade. So scalpers need to calculate that they will incur a commission charge each time they open and close a trade, as they can make short term trades frequently.

It can be seen that ECN costs can be very competitive. But these are typically variable spreads, and the actual cost can be higher than the quoted minimum, depending on various factors. Costs of this magnitude can be seen at CFD and spread betting brokers in the UK, for example. These brokers may allow news trading and support automated trading, for example by providing MetaTrader4, which has robots called Expert Advisors. But, since most are dealing desk brokers, they may reject orders or disallow some trading styles (for example scalping), though this in practice may be an infrequent occurrence. A reason then to use STP and ECN brokers is that they can be a) supportive of some styles and b) suited to some trading styles, assuming that the trader actually uses these styles of trading. Some trading styles may need very short execution times. And direct market access literally shortens the time to fill orders.

ECN brokers will tend to have an infrastructure to help speed up the order execution process. Some do this by co-locating their trading servers with liquidity providers (many use Equinix New York or London servers, and employ fibre optic cables). These efforts can reduce trade time delay down to a matter of milliseconds. This kind of speed improvement can help automated strategies, which depend on very quick market movements, made in rapid succession, by robots (automated trading strategies running typically on Virtual Private Servers).

So whether a non-ECN or an STP or ECN broker is chosen, may depend on the style of trading the trader makes use of. STP brokers may not have such high speed (though they will still tend to be fast), but can reduce slippage, by netting orders among their own clients. Slippage is the difference between the price quoted and the actual executed price, for orders based on market execution. However high speed low latency (delay) ECN brokers can reduce slippage by high speed order transmission. STP/ECN brokers may employ STP order execution, but also use infrastructure speed improvement technologies.

STP brokers may or may not reject orders, depending on their policy (the infrastructure to do this exists in their order processing model). STP or Straight Through Processing can be used to indicate that a broker does not impose restrictions on trading styles, but it does not necessarily imply this is the case, as it actually refers to the matching of orders by the broker with either their own clients or liquidity providers, which the broker may or may not do, depending on their policy. So instead of calling an STP broker which does not restrict orders as no dealing desk, they can also be termed 'no dealing desk intervention' brokers.

ECN brokers though will typically not restrict orders. Their aim is more to get orders onto the market and back as quickly as possible, and are not concerned with intervening in the order process. It should be noted that many brokers do in fact employ a hybrid model, allowing both B Book and A Book (A Book is the order book of liquidity providers).

So what does ECN mean ? It refers to 'Electronic Communication Network'. However this includes all participants, as brokers are themselves on the ECN. But it is used to refer to the ECN such as it connects the Interbank market, where the Forex market principally exists, as it does not have a central exchange. The extent to which the broker provides access to this market, is typically covered by the labels STP or ECN or combinations thereof. It also refers to the capacity of traders to access it and its prices in return for a commission charge, free from restrictions.

The total cost of the trade is not merely the spread, it is the spread and commissions, typically on each side of the trade (open and close). This means that costs competitive or lower can be found with other brokers (e.g. fixed or variable spread spread betting or CFD brokers). But these brokers may not support trading styles, which may be suited to ECN trading.

Briefly, what does ECN mean for the trader ?

It means technologies which can be responsive to the needs of a Forex trader, in particular. The more ECN a broker is, the less markets it tends to offer, and the bulk may be Forex. This is because of the decentralised way Forex is traded (unlike other markets) by banks and institutions on the 'front line', using both automated and discretionary trading (for example technical indicators). ECN brings that 'way' to the trader to an extent, and lets them do what they will with it. This can mean using styles which may be problematic at other brokers. But for many traders, there may not be much difference, in effect between using an ECN broker or a dealing desk broker, especially if the dealing desk broker offers MT4, fast order execution and the capacity to use automated trading. Conversely though STP brokers and even ECN brokers may offer a significant number of markets, and provide assurances about order intervention and lack thereof.

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