What is a true ECN broker?

filippo ucchino Filippo Ucchino calendar Last Updated: February 2022 timer 5 min read

On your quest to find the best forex broker you will come across many different broker types, each with its own features and characteristics. One of the most popular choices are ECN brokers.

It is important though if you choose this type of broker that you are actually dealing with the real thing. For that reason, we will help you understand exactly what is a true ECN broker and dig deeper into the characteristics and what you can expect from the best ecn stp forex brokers so you can make the ideal choice.

Let’s take a closer look.

Table of contents

What is a True ECN Broker?

A true ECN Broker is a NDD (No-Dealing-Desk) Broker which connects traders directly to liquidity providers, such as global banks and hedge funds, and other traders, through the  ECN (Electronic Communications Network) system. Typically a true ECN Broker offers lower spreads, a trading commission, fast execution model and is a good fit for scalpers.

How to Determine if a broker is a true ECN

To know that you are dealing with a true ECN broker, there are always a few things you can be on the lookout for.

These start with the spreads which should be lower and variable. This is a hallmark of a true ECN broker where spreads can often run quite close to 0 pips. You should also check that the broker is a no dealing desk broker as this is a key fundamental feature of an ECN broker.

More than that you can check out any mention of liquidity providers from your broker since a true ECN broker will pass your orders through to these liquidity providers with the network. There are also virtually no requotes or slippage with a true ECN broker so you can try to double check these stats to verify.

True ECN Broker Characteristics

Here is a more detailed look into some of the stand-out characteristics and features you will often find at a true ECN broker.

A True ECN Broker: Low spreads

The low spreads on offer are a very distinguishable point. These are going to be variable spreads and they are often as close as you will find to 0 pips at any broker depending on what you are trading.

If you are interested in some of the best low spread brokers then check out our top ten low spread forex brokers for more information.

A True ECN Broker: Trading commission

Given the extremely low spreads, one of the main sources of revenue for an ECN broker is the commission they charge per lot traded. The average per lot commission on each side of the trade with an ECN broker tends to be around $3 per lot. With that said, you can often find true ECN brokers with a lower, or higher commission.

A True ECN Broker: Fast execution model

Lightning-fast is a term you will often hear used when describing ECN execution. This is very true and often supported by very deep liquidity, no requotes, and extremely rare occurrences of slippage when you are dealing with a true ECN broker.

A True ECN Broker: Trading Hours

ECN brokers are the only type of brokers that allow you to trade during pre-market and after-hours times. Other brokers will have to stick to trading only during the markets opening hours.

Extended hours trading can bring benefits like allowing you to trade around news that happens during these periods although there can be downsides like lower liquidity and trading volumes along with a spike in volatility during some of these periods that can increase risk.

If you want to get more of an insight on this then you can look at our dedicated ecn trading hours guide.

Looking for the best true ECN Broker

If you are looking for the very best ECN broker, then you are in the right place. There are just a few things to consider in your search for the best choice that we will present here.

Above all, you will want to make sure the broker is very well-regulated by a respected body and provide safeguards like the use of segregated accounts, and negative balance protection as standard. Depending on your position you will also want to ensure the minimum deposit fits your needs.

From there, the spreads and any associated fees like an inactivity fee, overnight fee for CFDs, trading commission, currency conversion fees, and others are important since all will impact your profit directly.

Finally from a practical standpoint, you will want to be sure the trading platform be it MT4, MT5, or cTrader platform which is the top-choice for ECN trading, fits what you need in terms of usability and your own knowledge. It is always great to have a strong customer support team available too if you do happen to encounter issues.

To help get you started you can take a look at our handy guide on the best ecn stp forex brokers.

What is a True ECN Broker – FAQs

How Do ECN Brokers Make Money?

ECN Brokers make most of their money by charging a trading commission for each position you open. The average of the industry is around $3 per lot. With that said, some will of course be lower, while others charge more. You should always double check.

Which are the best ECN brokers?

There are many ECN brokers out there. In our ECN/STP forex brokers list, we list ten of them. Pepperstone, HotForex, FP Markets and IC Markets are some of the best although the final choice will depend on which best suits your individual needs.

About the Author

Filippo Ucchino

Co-Founder - CEO - Broker Expert
Filippo is the co-founder and CEO of InvestinGoal.com. He has 15 years of experience in the financial sector and forex in particular. He started his career as a forex trader in 2005 and then became interested in the whole fintech and crypto sector.
Over this time, he has developed an almost scientific approach to the analysis of brokers, their services, and offerings. In addition, he is an expert in Compliance and Security Policies for consumers protection in this sector.
With InvestinGoal, Filippo’s goal is to bring as much clarity as possible to help users navigate the world of online trading, forex, and cryptocurrencies.

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