Leave a comment

The first and foremost thing you need to know is what ECN broker is. ECN broker can give traders dramatically fast transaction execution time counted as milliseconds and trading volume of more than $1,000. Other way, if you want to begin with modest trading volume and an easy to understand trading platform, social trading network can be your choice. In this article, we will discuss both advantages and disadvantages of ECN brokers.

The glimpse of ENC broker

What is ECN broker? ENC is a short form of Electronic Communications Networks which is primarily used by forex brokers to link their customers with big entities in the forex exchange market such as Banks, financial organizations, brokerage agents and other entities who can provide good liquidity. ECN brokers collect purchasing quotes and selling quotes for these financial entities and offer their customers the best they have. This technique is relatively clear and safe because ECN brokers do not make money for the quotes differences but charge a fixed commission on every transaction. Another name of ECN brokers is STP – Straight Through Processing

The way how ECN brokers work

What ECN broker work for? Customers are given a clearly and directly access to interbank market. Powerful liquidity entities such as International Banks, brokerage agents and financial organizations and so on provide their quotes to ECN brokers who own a system which automatically picks the best quotes to offer to ECN customers. After that, it is up to brokers’ business processes and models, these quotes are given directly to customers or broker can remade the quotes by adding normally about 1 pip. When customers decide to make transactions, the orders are sent to liquidity providers via ECN brokers’ trading system. The order are sent without any information on customers’ stop call and order limitation. Then, just in milliseconds, your orders will be confirmed by these providers. 

Advantages of ECN brokers

  • Super-fast transaction execution time
  • No conflict in benefits; brokers do not trade with you
  • Clear transaction – as spreads based on the market
  • Powerful liquidity
  • Scaling – interchange news and risk management
  • Unnamed transactions
  • No interfierce to news events

Disadvantages of ECN brokers

  • Big begining trading volume
  • Unfriendly trading platform to new traders at the beginning
  • Possible high spreads due to the market
  • Higher trading fee (but not always)
  • No micro account available (except for the case that broker is a Bank)
  • Low leverage
  • No stop loss is assured

Implemented quotes may not be fixed because the market moves in milliseconds

In short, in this article we answer the question of what ECN broker is. Not like market builders, ECN broker cannot give you high leverage. Usually, ECN brokers can provide a leverage of 1:100 due to the fact that they are working in real interbank market not a group of powerful liquidity provider like marker builders. That is why traders have to put a minimum deposit of $1,000. Besides, ECN brokers do not offer micro accounts. But they can allow a trader to trade in parts of lot size, 1/0 of a lot is equal to $1 for a pip.