Broker types and revenues: fixed vs variable spreads vs commission.
rows · ECN Forex Brokers ECN stands for “Electronic Communication Network” - a system that is designed to eliminate the role of a middleman in order execution. In simple words this means that when a trader signs up for ECN execution, they get direct access to other participants in the forex market – i.e. otherb individual traders, brokerages, . rows · With ECN broker traders can see where the liquidity is and execute trades. .
Despite these fees, the combination of spread and commission is usually at least a little lower than the spread charged on a similar trade by non-ECN brokers. It is this combination of lack of conflict of interest plus the typically low cost of trading that makes ECN brokers so attractive to traders, but there are some other factors worth considering before you decide that an ECN broker, or an ECN account some brokers offer both ECN and dealing desk type accounts is for you.
Account size — ECN brokers usually require higher minimum deposits. A few insist on minimum trade sizes as high as 1 minilot instead of the 1 microlot one tenth of a minilot that has become more standard within the Forex industry. Execution — ECN brokers typically offer excellent execution speed and sometimes spreads are even non-existent or inverted for a second or two. Note that during periods of very low liquidity execution may be seriously delayed as there is no market maker to take the trade if no client wants it.
This can lead to seriously negative slippage events or being stuck in a bad trade a little longer than you would be if trading with a market making broker. Spreads — these are usually an attractive feature, even when commission is considered. However, spreads can widen dramatically and can sometimes be beyond what market maker brokers will be offering at the same time.
Spreads will of course vary a lot as they are based more precisely upon market supply and demand. Fixed spreads are only available through market making brokers. They are rarely worth it economically, as it happens, but that is another story.
Additionally, ECN brokers tend to require higher minimum trade sizes in these kinds of non-Forex instruments. This means that if you want to be very diversified, you might have another reason to consider using a market making broker in addition to or as an alternative to an ECN broker. Maximum Trade Size — ECN brokers usually offer much higher maximum trade sizes, as they at least theoretically do not have to worry about processing any order through a dealing desk. ECN brokers, if they specify maximums, tend to place them at much higher levels.
Although an increasing number of ECB brokers do now allow trading in microlot sizes, a few still do not, so it could be an issue if you prefer to trade in microlots. A true ECN broker is simply defined as a broker that plugs your orders into a network where it is automatically matched to a matching order from another client or liquidity provider. This is the textbook definition to work from. Most brokers claiming to be ECN brokers are probably telling the truth about this at least, although if you see large spreads, spreads that never seem to really vary, or continuously slow execution, they are almost certainly not.
The network is only as good as its source. To be regarded as a real ECN broker, the liquidity provider should really be a tier 1 bank. We must wonder how often this is really the case, and why many brokers that advertise themselves as ECN brokers are so tight-lipped about which liquidity providers they use! When the first ECN brokers started appearing, bank traders started to ask how orders for minilots let alone microlots could possibly be sent straight through to tier 1 banks for processing.
Bank traders will tell you that at this level, trade sizes are usually in minimums of ten or so full lots. The final question is, does it really matter? If a broker is at least trying to match orders directly, there is not much of a conflict of interest, potential or otherwise. The usage of this website constitutes acceptance of the following legal information. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds.
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MBCFX has different platforms and multi prime brokers. Thanks a million times for your wonderful and illuminating website. With regard to scalping has anyone experience with: Any information about NordMarkets? Are they able to provide true ECN? How is their reputation and reliability?
MT4 is platform it is not broker. It is used by broker. Let me quote them: Because IBFX currency prices are derived from its financial institution liquidity providers, its price feed most accurately reflects the natural movements of the interbank FX market.
In addition, IBFX trading profits are generated exclusively on its markup to institutional prices, and never from a dealing desk trading against customer positions. They'll take the quotes from the interbank and then based on that make their own markups and quote you a spread. This is a hybrid model of an STP, you won't see a real interbank dealing rates, since you'll be trading on quotes form IBFX, but they won't trade against you using a dealing desk.
I just filled out an application for an account with interbank fx. I had to read a paragraph and check off that I read it. That paragraph stated that they will be taking the opposite side of my trades and that they may delay processing of my trade while some department examines it.
Also they may give me quotes different than some of their other customers. Sure sounds like a dealing desk and not an STP as you have listed. Please share your experience about trading with Alpari here: Here is a new list of brokers offering CFDs. Hope this helps in some way to find a needed broker. I am looking for a ecn, stp, level 2 forex broker that offers CDF's in equities, indices, currencies, and commodities. I Highly Recommend anybody that wants to trade with swissfxbroker. I am a Day Trader, Been able to withdraw my profits for the second time now.
Tadawul Fx has "Dealing Room Services" on its acct type page http: Did you post those two above above because they contradict each other in a matter of days. Please clarify which one you're are sticking by. Has anyone experienced trading with FXCH? Although it is listed as STP, I read many reviews saying the execution time is bad and there are requotes etc. Some even classify it as SCAM. Currenex connects global banks, brokers and other funds to a superior electronic trading network.
It doesn't provide services to individual clients, as far as we know. Here is a link that might be helpful to some. Welcome to experience the Broker Search on a whole new level! Their charts look more stable without large spikes. I've checked with both Alpari: Alpari claims that he is a NDD broker.
Thank you very much for this enormous help.
If you live in the United Kingdom, you might want a U.