Through ECN brokers, traders can execute deals on more than one instrument – for example shares, forex, indices or commodities. This prevents traders having to open multiple ECN accounts to access these markets. This approach allows for offering more stable or fixed spreads. But those spreads are usually higher to compensate for risk and enable the dealing desk to profit by selling at a higher price.
You can get started in minutes, and minimum deposits start at just $10. Best of all, you will not be accustomed to any spreads when trading via your ECN account. The platform is home to high levels of liquidity and fast execution speeds.
ECN Accounts vs. Market Maker
This approach allows for better trade planning because total fees are just a simple calculation away. An ECN broker is a financial intermediary that allows its clients to execute orders on financial markets through an electronic communications network . In the end, the trading and technological infrastructure of a brokerage are determined by an analysis of the target audience, as well as the desired ratio of risks and profits. Only after that, you look into the difference between execution models. We at Soft-FX are ready to prove it to you by the example of our products and solutions. When Forex brokers’ clients began accumulating experience en masse, a large number of successful traders appeared in the market.
This helps limit price manipulation, as current and past information are readily available to all, making it more difficult to act unscrupulously. One thing to note is that ECN brokers avoid wider spreads that are common with a traditional broker. However, the ECN broker will benefit from commission fees per transaction – this is a fixed, transparent commission.
ECN Broker: Definition, How It Works, Benefits, and Downsides
The differences between ECN and STP brokers may seem small but crucial. ECN and STP brokers are both examples of No Dealing Desk brokers. Essentially, they are not Market Makers and do not provide liquidity to their traders.
One of them is the ability to partially lay off excess risk to external liquidity providers when needed. And the word ‘partially’ can mean the smallest shares of in-house trades. ECN brokers make money from fixed commissions charged to the customer on each trade.
#3 Best ECN brokers
An ECN broker is usually a No Dealing Desk broker, which means that the clients’ orders do not pass through a Dealing Desk, which enables execution in a direct connection between the parties. ECN brokers are getting more popular in the Forex sector, but it is still important to conduct your homework before choosing one. In order to function legitimately, ECN brokers must always be regulated by a governmental organization. This assures that they have met specific requirements and are subject to continuing supervision.
Traders can choose the positions and spread that best suit them from thousands of providers worldwide. RoboForex was founded in 2009 and is regulated by FSC in Belize. Compared to the regulation of other brokers on our list the Belize FSC is not considered a top-tier regulator. Extended trading is conducted by electronic exchanges either before or after regular trading hours. Volume is typically lower, presenting risks and opportunities. The offers that appear in this table are from partnerships from which Investopedia receives compensation.