nebulous regulatory standards and high leverage trades, youve got an unprecedented number of forex brokers to choose from. Unfortunately, its sometimes hard to tell if your broker has your best interests at heart.
If peace of mind is important to you (and who would say it isnt?) you might be interested in learning about ECN brokers. ECN stands forelectronic communications networkand it helps bring transparency to the currency markets.
Currencies arent traded in centralized locations the way stocks are on exchanges. Currency trades happen all over the world, but most take place on something called theinterbank market. The interbank market is where the worlds largest global banks exchange currenciesto provide liquidity to the forex market. Retail traders dont have access to this market, so they trade through either an ECN or a market maker.
ECNs are complex computer systems that connect buyers and sellers from every corner of the forex market. Since ECNs have access to traders on both on the interbank market and retail brokerages, counterparties to trades can be found without the help of a market maker. Buyers and sellers can easily be matched, which results inquicker tradesand more accurate spreads.
ECN brokers usuallycharge commission and have high minimum account balances.But unlike market maker brokers, ECNs do a good job of executing your trade at the price you want and theres no perverse incentive to trade against the customer. Since the market maker is the counterparty to a retail customers trade, conflicts of interest exist and that presents a risk in the largely unregulated forex market. The ECN broker works as a middleman, not a counterparty.
ECN brokers tout themselves as fast, trustworthy and anonymous. The SEC considers ECN brokers to be alternative trading systems because they match orders through third parties instead of directly on an exchange or with a market maker. But dont let this label deter you. If you have the capital to open an ECN account, theres a number of good reasons to do so.
Here are a few important things to consider when choosing a forex broker:
Because the forex market can be a wildly unregulated playing field, you want to choose a broker that can promise security and anonymity. Make sure your forex brokerage has a relationship with one of the primary forex regulatory groups like the Financial Conduct Authority (FCA), National Futures Association (NFA) or the Australian Securities and Investment Commission (ASIC).
If you want to use MetaTrader 4 to trade currencies, make sure the brokerage you choose supports the platform! Youll find a list of supported platforms and app on each individual brokers website.
Sometimes a huge news story or sudden flush of trading activity can cause slippage. During periods like this, trades can be executed at prices beyond the customers request or dropped entirely. The best ECN brokers provide uninterrupted trading at the best possible prices.
Surprisingly, United States customers arent shut out from ECN brokers! You might not be able to use MetaTrader, butU.S. traders can still enjoy the benefits of ECN trading.Each of the following brokers uses an actual ECN to match buyers and sellers and doesnt deal against its own customers.
Spreads start as low as $1But vary based on trading volume
FOREX.comis Benzingas top choice for the best forex broker, and is continually favored by brokerages and individual investors alike. A subsidiary of GAIN Capital, they have almost $1.5 billion in assets and $350 million available liquidity. FOREX.com is also known for executing 99.65% of their trades in under one second.
FOREX.comhas extensive tools for beginners and advanced traders alike, offering live streams of market data, commentary, analyst research, screeners, and more. They also have an email newsletter that covers how the market is doing, along with entry and exit points.
Dedicated to helping you develop your forex trading skills, they offer courses for investors of all skill levels to continue learning.
You are able to tradeFOREX.coms84 different currency pairson their Advanced Trading Platform for your desktop, MetaTrader, and through their web trading. These platforms are also easy-to-use and customizable.
$0.005 per shareminimum $1 and maximum 0.5% of trade value; volume discount available
Interactive Brokersaccepts United States clients for its forex trading platform, which providesdirect access to interbank market pricing. Youll be able to trade 23 different currencies with commissions as low as 0.08 pips, but unfortunately, theres no support for the MetaTrader platform.
Account minimums at Interactive Brokers are a bit high, though. Youll need a $10,000 deposit in order to open an account, which may deter some smaller retail traders. But U.S. customers dont have many forex brokerage options and Interactive Brokers is one of the best.
Additionally, its education library is loaded with different strategies and techniques for trading. If youre just getting started learninghow to trade forex, youll find a wealth of knowledge to get you started.
Read Benzingas full Interactive Brokers Review
Dukascopyis a Swiss banking firm that offers a variety of forex and CFD products. Regulated by European Securities and Markets Authority, Dukascopy is a true ECN broker that doesnt deal against its clients.Dukascopy supports MetaTrader 4 for forex tradingand also has its own proprietary trading platform. The firm claims to give equal trading rights to all clients, which means that large banks and small retail customershave equal opportunity to provide and consume liquidity.All clients get the same price data through a single feed to ensure transparency and fairness.
In addition to low spread forex trading, Dukascopy has CFDs onstocks, indices, commoditiesandcryptocurrencies.Commissions are high for small accounts, so be sure this firm fits your budget before you open an account. Try a demo account beforehand, too.
The worlds largest true ECN forex broker is the tagline forIC Markets, an Australian firm formed in 2007. IC Markets connects not only to tier-1 banking institutions, but also large market makers and dark pools. Thanks to this wealth of information (and liquidity),IC Markets can accurately match buyers and sellers in real-time while making spreads almost nonexistent.Theres no requoting, no manipulation and traders are free to make whatever moves they see fit.
IC Markets supports bothMetaTrader 4 and 5,with download options for Windows, Mac, iOS and Android. Since American customers arent allowed to open accounts, leverage canincrease to 500:1 for some currency pairs. IC Markets offers 65 currency pairs in all, plus CFDs on stock indices, commodities, futures, bonds and cryptocurrencies.
Heres an American company regulated by the National Futures Association (NFA) that doesnt act as a counterparty to client trades. Thats right, a true ECN in the United States! Youll need to use MetaTrader 4, but most forex traders likely wont find that to be a problem.ATC Marketsalsosupports MetaTrader 4 for Mac, so all users can enjoy the platform regardless of operating system.
There are about40 currency pairsto choose from with spreads that average between 0.3 and 0.5. Only 2% margin is required on major pairs, which is the maximum leverage allowed by U.S. law.
Youll need a hefty$3,000 to open an account with ATC Markets, which isnt uncommon among true ECNs. Commissions are $10 for a standard 100,000 lot contract or $1 for a 1,000 lot mini-contract. ATC Markets is probably the top option for U.S. clients if you can pony up the $3,000, but there are more options for traders in the U.S.
XTBis a Polish forex brokerage that offers currency trading along withCFDs on stocks, commodities, and cryptocurrencies.The firm has over 14 years of experienceand has established offices all over Europe. You have two great weapons at your disposalxStation5 and MetaTrader 4.
MetaTrader 4 and xStation5 give you automated control over your trading strategies, but also the ability to trade a variety of instruments at lightning speed.Leverage goes as high as 200:1for retail clients, who trade48 currency pairswith spreads as low as0.35 pips.Regulated by the Financial Conduct Authority, XTB is a great broker for MetaTrader 4 enthusiasts to trade currencies quickly and efficiently.
Launched in 1998, this Danish bank aims to bringhigh-tech trading tools to retail investorsso they dont lag behind institutional heavyweights. Transparency and fairness are important toSaxo Bank; thats why it has agreements with regulators in15 different jurisdictions and clients from 120 different countries.Saxo Bank has strict order handling policies and gets liquidity from providers like JP Morgan, CitiBank, Royal Bank of Scotland and Nomura International.
Saxo Bank gives access to an impressive182 forex spot pairs, with thousands of additional CFD products and40 forex option instruments. Saxo also employs personal relationship managers, real-life human advisors to discuss trading and account information. Customer service is a strong selling point for Saxo Bank and its forex options might be the most plentiful in the industry.
Pepperstoneis an Australian-based forex broker with low spreads and low minimums. Youll only need$200 to get an account openand spreads average between1 to 3 pips for major currency pairs.Pepperstone isnt open to U.S. traders but can provide leverage up to 500:1. MetaTrader is the platform of choice here and the straight-through processing (STP) system guarantees accurate pricing and fast execution. Both MetaTrader 4 and 5 are available if account holders want access to multiple markets.
Over 70 currency pairs can be traded, along with CFDs on indices, commodities, and cryptocurrencies. Pepperstone provides liquidity through 22 different major banks across the globe and customers dont need to fear the firm trading against them. A great choice for new forex traders learning how to navigate the market.
Vantage FXis a rare finda true ECN withlow account minimums and commissions,but its another place U.S. clients cant go. Still, Vantage FX has over 120 forex and CFD products, all traded in a healthy regulatory environment thanks to a relationship with the ASIC. MetaTrader 4 and 5 are both supported, and Mac users will be happy to find a download option for themselves too.
Commissions are $3 USD for every lot, which is 100,000 units of the customers base currency. Vantage FX accepts eight different currencies and has 40 different forex pairs to trade. CFDs based on indices, commodities and cryptocurrencies can also be traded. Vantage FX has asolid library for research materialsfor beginners and you only need $200 to open a basic account (the pro account requires $500).
Often, reviews from current or past customers can help you determine the best forex brokerage for you. Youll need to find one that fits both your trading budget and style and doesnt claim to be something its not. Sometimes brokers claim to be ECNs even if theyre actually a market maker, so check out a review or two before you sign up.
$5 per trade, Per-share pricing: $0.006-$0.01 per share ($1 minimum per trade) based on trading volume, Unbundled pricing: $0.002-$0.01 per share ($0.50-$1 minimum) based on trading volume
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