You may have come across the term ECN (Electronic Communications Network) when researching brokers. ECN brokers are Direct Market Access (DMA) brokers; they are distinct from Market Maker (dealing desk) brokers, in that the counterparty to your trades with an ECN broker is never the broker themselves but a liquidity provider operating on the interbank market.

These are the most trusted FSCA regulated ECN Forex brokers in South Africa, compared by trust, reputation, platform support and trading conditions.

You may have come across the term ECN (Electronic Communications Network) when researching brokers. ECN brokers are Direct Market Access (DMA) brokers; they are distinct from Market Maker (dealing desk) brokers, in that the counterparty to your trades with an ECN broker is never the broker themselves but a liquidity provider operating on the interbank market.

These are the most trusted FSCA regulated ECN Forex brokers in South Africa, compared by trust, reputation, platform support and trading conditions.

83% of retail investor accounts lose money when trading CFDs with this provider

83% of retail investor accounts lose money when trading CFDs with this provider

72.83% of retail investor accounts lose money when trading CFDs with this provider

72.83% of retail investor accounts lose money when trading CFDs with this provider

75.35% of retail investor accounts lose money when trading CFDs with this provider

75.35% of retail investor accounts lose money when trading CFDs with this provider

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Brokers come in two distinct types dealing desks (also known as market makers) and non-dealing desks (the most common of which are ECN).

To understand what an ECN broker is we first need to understand what a dealing desk is and how the two differ.

Dealing desks are often called market makers because theyarethe market when a dealing desk prices a trade that you see on your platform, you are seeing what they have decided is a fair price, given the current market conditions.

If you agree to this price and decide to make the trade offered, you are dealing with the broker, not with the wider market, and they will be the counterparty to your trade. In essence, they are betting against you if you lose money on that trade, the broker is going to profit.

There is an obvious conflict of interest inherent in this business model and, for this reason, some traders prefer to have a neutral party as a conduit for their trading.

Dealing desks tend to not take a commission on trades, instead of making money through the spread and their trading platforms tend to be relatively easy to learn. Markets on a dealing desk platform will also be less volatile a disadvantage to scalpers and slippage (a change in price between confirming a trade and the trade being posted) can be an issue.

The clue is the name: ECN (Electronic Communication Network). ECNs are so called because they rely on a network of market participants (usually large lenders such as banks) to serve as counterparties to Forex trades. When you post a trade with a true ECN they will find a third-party to take the other side of your trade, removing the conflict of interest present with a market maker.

ECN brokers will charge a commission for this service (as they cannot profit from your trade), but spreads tend to be much tighter than with market makers. At times of market volatility on major currency pairs, you will often see spreads disappear entirely, down to zero pips. Another thing to remember with pure ECN brokers is that you may have delays to trade execution, resulting in requotes and slippage this can be particularly difficult for scalpers in a high-volume market.

Another acronym you will often see in combination with ECN is STP (as in ECN/STP). STP is a method of the transaction with STP your order is sent directly to the counterparty through the Financial Information Exchange (FIX) protocol. The FIX protocol decreases trade execution time, reduces slippage and ensures that traders get the best available pricing.

So, while ECN brokers do not have the inherent conflict of interest present with market makers, there are larger trading risks involved and the commission will always be charged on your trades. You will also often find that true ECN accounts will require a higher minimum deposit putting them out of reach of a lot of new traders.

Are ECN brokers objectively better than market maker? I dont believe this to be the case. All those we work with are trustworthy and well-regulated and broker choice is always down to personal preference. Whether you go with an ECN broker or a market maker, if you choose one from our list of the best in South Africa you will be in good hands.

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Trading leveraged products such as Forex and CFDs may not be suitable for all investors as they carry a high degree of risk to your capital.

It is really important that you do not trade any money that you cant afford to lose because regardless of how much research you have done, or how confident you are in your trade, there will always be a time that you lose.

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Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.