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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?
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.
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:
- 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.
- 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.
- 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.
- 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 ored 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:
- 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".
- 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.
- 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.
- 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.
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:
| Compare | IC Markets | Pepperstone |
| General Rating |
4.02/5 |
3.31/5 |
|
| Score | |||
| Trustpilot |
4.8/5 32767 users |
4.6/5 1965 users |
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| 💼 Regulation | |||
| ❗ Info | |||
| ⌛ Established | 2007 | 2010 | |
| 💲 Min Deposit | $200 | $0 | |
| ⚖ Max Leverage | 1:1000 | 1:400 | |
| 🔢 Spread | Variable | Variable | |
| 💸 Commissions | $3.50 | $7 | |
| 💡 Min Position | 0.01 lot | 0.01 lot |
| 💳 Payment | Crypto, BPAY, Credit/debit cards, FasaPay, Neteller, PayPal, Skrill, UnionPay and Wire transfer | Credit/debit cards, PayPal, UnionPay, Wire transfer, Neteller and Skrill |
| 🏢 Office(s) |
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| 🧩 Demo Account | ||
| 📁 Segregated Account | ||
| 🕋 Islamic Account | ||
| 👨💻 PAMM Account | ||
| 📈 Managed Account |
| 💱 Hedging | ||
| 🇺🇸 US traders | ||
| 🕛 Swaps |
| 🏆 Trading contests | ||
| ⚡ Automated trading | ||
| 💰 Bonus offers | ||
| 📖 Free education |
| 1️⃣ One-click trading | ||
| ⏱ Trailing stop | ||
| ⏳ Pending orders |
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 Gold & Silver |
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 Crypto |
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Etf |
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 Stocks 1:5 |
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| 🗣 Website Languages | Arabic, Chinese, English, German, Indonesian, Japanese, Korean, Malay, Portuguese, Russian, Spanish | Chinese, English, Russian |
| 🚪 Trade Now | Open IC Markets | Open Pepperstone |
For more forex broker comparisons, try our tool here.
4 Comments
Park
Feb 22 2023
Fast execution, transparent pricing, no requirements, true market diversification. Everything ECN Broker offers seems like a really good feature for scalping methods. This means that scalping techniques require very fast execution with real market spreads offering very low spreads. I think it's better to scalp in ECN Broker. Also, because I believe it is connected to a top-notch liquidity provider, without doubt, I can say that trading with ECN Broker is very safe to trade in there. But I don't know if it's the best way to trade on other ways other than scalping method and why do ECN Broker fees seem higher than other standard accounts?
Mike
Feb 22 2023
Park: If you prefer to trade with lower spreads than high commissions, you can make a trade that suits you. Either scalping, day trading or swing trading. You can really do whatever trading style that you want.
There are several articles that provide trading tips for trading types other than scalping.:
Lee Jihon
Feb 22 2023
Maybe it's off topic. As mentioned in our Broker Types article, there are ECN Brokers, STP Brokers, and Dealing Desk Brokers. As for the commissions themselves, the authors also admit that by creating their own marketplace, DD brokers offer lower commissions and are free to set their prices. Novice traders may find DD Brokers terms and conditions more favorable due to reduced fees and minimum capital requirements.
I would love to hear how DD brokers work and why you can create your own market. Also, is it safe to do business with them? thank you very much!
Jadon
Feb 22 2023
Lee Jihon: DD Brokers work like this guy. When you open a bid price for a trade, they create an ask price. Basically, they will give you orders that go against you, but if there are other merchants who have orders that go against you, they will match yours. And this trade area continues to rotate, creating its own market. As such, the DD market also has another name: Market Maker Broker. Although slightly modified by some brokers, the charts are very suitable for the real market, but not proven yet to be modified.
Yes, prices are free to change without any doubt. And it can be cheaper because the trade takes place in the market they created. Unlike STP and ECN brokers who trade directly in the market, prices there can't be changed, but can be markups with STP brokers. IS it safe to trade with them? Need to see the regulation first, if the regulator is very strong regulator such as ASIC, NFA, FCA, and etc, it will be very safe to trade with em. But, you can't do the scalping in DD market.