ECN forex brokers carry relatively higher trading fees, but more suitable for professionals who seek to make use of expert advisors or scalping strategy.

When you are looking for forex brokers for the first time, you may find a lot of mentions about ECN, STP, and Dealing Desk brokers. It is said that ECN forex brokers are superior compared to STP and Dealing Desk brokers. Is this true? What are ECN forex brokers and how do their fees compare to other types of brokers?


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What are ECN Forex Brokers?

ECN is shorthand for "Electronic Communication Network", a type of bridge that is used by brokerage companies to connect retail forex and CFD traders to their liquidity providers. ECN bridge enables buyers and sellers between these parties to deal directly, without passing through the broker's dealing desk. This is the reason why ECN forex brokers also often called "No-Dealing Desk (NDD)" brokers.

ECN is not the only method that is commonly used by brokers to connect traders with liquidity providers. There's also Straight Through Processing (STP). According to STP protocols, traders' orders are directed to the liquidity pool where orders will be executed according to the best price policy. However, the ECN bridge is considered superior because of the preception of non-interference from brokers.

ECN Forex Brokers

 

Do ECN Forex Brokers Provide Better Services?

ECN bridging technologies will enable forex brokers to provide excellent services for some, but it may also prevent them from providing other types of services common among STP and market makers. So, it is not that ECN forex brokers are better per se. Depending on what is your trading style, you may or may not need ECN forex brokers.

There are at least four ECN forex brokers advantages:

  1. Fast execution: Some STP and DD forex brokers may claim to have fast execution, but ECN forex brokers are still the fastest. Traders' orders will not be handed to an internal dealing desk nor undergo processing that may require several seconds delay.
  2. Transparent pricing: ECN forex brokers will provide real market quotes through Depth of Market (DoM) that could be accessed freely by traders in each trading platform. Therefore, there are fewer disputes between traders and brokers in relation to price execution.
  3. Real market spread: ECN forex brokers offer interbank connectivity without any interference. Therefore, prices are real market prices and spreads are free of mark-up.
  4. No requotes: If there are no suitable prices for your orders, the broker will not offer "alternative prices" such as requote. Instead, orders will be filled at the next best price available or delayed until there are suitable prices (see brokers' policies).

On the other hand, ECN forex brokers may have limited capability to reduce trading fees. They could not create a fixed-spread account, zero-spread account, cent account, and so on. ECN forex brokers could not even provide free commission services, because the commission is their main source of income.

 

How Do ECN Forex Brokers Charge Trading Fees?

ECN forex brokers may charge up to four types of fees, they are:

  1. Spread: As mentioned previously, ECN spreads are real market spreads. ECN forex brokers with tier-1 liquidity providers may provide lower spread compared to ECN forex brokers with connections to tier-2 aggregators. ECN forex brokers with the lowest spread are also known as "raw spread forex brokers".
  2. Commission: As ECN forex brokers could not mark-up trading spread, commission fees become their main source of income. Commission fees may be charged per side or per round turn. One "round turn" means one round of opening and closing position, while one "side" means the execution of half-round.
  3. Swap (overnight fees): Most ECN forex brokers have to charge swap fees for positions held overnight, in accordance with market rules. If you often need to hold positions for several days at a time, then ECN forex brokers may not be your cup of tea.
  4. Deposit/withdrawal fees: This is where some ECN forex brokers may compete with each other. Some brokers may charge nothing, while some others charge more.

All in all, ECN trading fees may be comparatively higher than STP dan Dealing Desk forex brokers' charges. In comparison, DD brokers create their own market and can freely determine their prices. Beginner traders may also find DD brokers' terms and conditions more favorable, due to the reduced fees and minimum capital requirements.

Minimum capital requirements

ECN forex brokers are more suitable for professionals who seek to make use of expert advisors (trading robots) or the scalping strategy. Traders will be guaranteed of receiving the best market prices and free of brokers' interference. But you have to make sure that your ECN broker has received licenses from a competent regulatory body, in order to avoid scams under the guise of ECN. For comparison, see some of the best ECN brokers worldwide such as  IC Markets, Pepperstone, and Alpari .

The three brokers' specifications can be compared below:

Feature IC Markets Pepperstone Alpari

Rating

General Rating 4.23/5
4.43/5
Trustpilot 4.8/5

rated by 18483 users
4.7/5

rated by 1367 users
2.8/5

rated by 6 users

General Information

Office(s) Australia, Hong Kong and Viet Nam Australia, China, Kenya, Ukraine and United States Saint Vincent and Grenadines
Regulation ASIC ACN 123 289 109
CySEC, 362/18
Securities Commission of The Bahamas, SIA-F214
The Financial Commission, 25.11.2021
ASIC, 414530
BaFin 151148
Capital Markets Authority of Kenya, 128
CySEC, 388/20
DFSA (Dubai), F004356
FSA (Seychelles) SD026
FSA (St. Vincent & the Grenadines), 20389 IBC 2012
The Financial Commission, 01.09.2013
Established 2007 2010 1998
Minimum Deposit $200 $200 $1
Maximum Leverage 1:500 1:500 1:1000
Spread Variable Variable Variable
Commissions $3.50 $7 $16
Minimum Position 0.01 lot 0.01 lot 0.01 lot
Payment Bitcoin, BPAY, Credit/debit cards, FasaPay, Neteller, PayPal, Skrill, UnionPay and Wire transfer Credit/debit cards, PayPal, UnionPay and Wire transfer AdvCash, Bitcoin, Credit/debit cards, Ethereum, FasaPay, Litecoin, Neteller, Perfect Money, QIWI, Skrill, Tether (USDT), UnionPay, Wallet One, WebMoney, Wire transfer, YooMoney and Zcash
Official Website Visit IC Markets Visit Pepperstone Visit Alpari

Account Variations

Segregated Account
Islamic Account
PAMM Account
Managed Account
LAMM Account
MAM Account
Forex Demo Account

Trading Requirements

Hedging
US traders are welcome
Requires sending documents via postal mail
Overnight interest rates (swaps)
Trading by telephone

Trading Features

Trading contests
Automated trading
Interest rate on funds
Bonus offers
Free education
Personal manager
Affiliate program

Trading Platforms and Complements

Mobile trading
Browser-based platform
Trading via API
One-click trading
Trailing stop
Pending orders
One-Cancels-Other (OCO) orders

Instruments Traded

Forex
CFD
Indexes
Spread betting
Gold & silver
Cryptocurrencies
Stocks
Binary options
Oil
Metals
Energies
Futures
ETF
Soft commodities
Options
Agriculture
Bonds

Customer Support

Website Languages Chinese, English, Japanese, Russian Chinese, English, Russian Arabic, Chinese, English, Indonesian, Persian, Russian, Spanish, Ukrainian
Email Support
Call Support
Chat Support

Reviews

General Review Read IC Markets Review Read Pepperstone Review Read Alpari Review
User Reviews

cosmicpower333

Jan 18 2022

What kind of forex pair is included in the raw account? Is it only major pairs?

hakuna-matata

Jan 14 2022

How much commission fee does IC Market charge for cTrader Raw Account?

More User Review

Drew Fabrizio

Aug 20 2020

I started with Pepperstone a couple of weeks ago. For the first time, everything seems fine, but it's just that their MT4 platform is really lagging during events. Also, their commissions are relatively expensive. It's not that they're not good, but their calculation with commissions and swaps really not my type.

Harley Cadwell

Aug 20 2020

I place my withdrawal on Saturday, then on Monday, I got the money. It's a relatively fast process. Looking forward to another withdrawal this week. Not much but glad I got the profit.

More User Review

Cayenne

Jul 28 2020

Alpari is good for a newbie like me. The MetaTrader is working just fine. I learn trading from my workmates which already trading in Alpari since 5 years ago. Considering this, so I thought that Alpari is reliable. 

Kiki Paramount

Jul 24 2020

I immediately use Alpari since the beginning. Alpari platform is very easy.

If only Alpari wanted to make a new breakthrough that could motivate novice traders, like me, to be successful trading ... I would give two thumbs up to Alpari. But yeah, for the time being, I won't move anyway, because Alpari customer service is so friendly. Hehe...

More User Review

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