Many brokers that claim to offer ECN pricing may not be true ECN brokers, this article introduces you to the tips to distinguish them and the list of true ECN brokers。

A true ECN broker is a forex broker that connects to interbank liquidity sources such as banks, hedge funds and mutual funds through an electronic communications network (ECN) operator。Your order will be forwarded directly to the liquidity provider, hence also referred to as "non-trading desk broker"。

A real ECN broker acts as an intermediary, matching your trade with global market participants, so they can't bid against you (unlike a market maker broker who stands opposite your trade)。When they charge a commission based on your trading volume, it will also motivate you to succeed so that they benefit。

Real ECN Broker

We browsed dozens of international forex brokers and found four genuine ECN brokers with enough credibility:

• AXI
• FXOpen
• IC Markets
• Vantage

"ECN Broker" and "Real ECN Broker"

ECN brokers usually offer variable spreads starting at 0 o'clock, called "raw spreads," directly from the market。Spread volatility is highly dependent on current market conditions and can sometimes change dramatically during periods of high volatility and low liquidity。

Since ECN brokers do not mark up, commissions must be charged to cover a portion of the revenue stream。Commission fees may start at $3 per standard lot trade and increase as liquidity deepens。

We can define two common characteristics of all ECN brokers as raw spreads and expensive commissions.。A true ECN broker must also cultivate a direct link to the market, that is, a connection to a network of liquidity providers。

In fact, any broker can apply raw spreads and commissions, even without maintaining deep liquidity and direct contact with the market, which is how "ECN brokers" differ from "real ECN brokers."。

Features of a true ECN broker

Real ECN brokers should play the role of intermediaries by shifting prices from the real market, rather than simply inventing variable spreads and calling them "primitive."。We may never know what is going on behind the scenes, but we can infer two distinct characteristics of a true ECN broker: the license of a top regulator and the connection to a network of liquidity providers.。

Tier 1 regulators are among the most heavily regulated in financial markets and are therefore highly trusted by FX traders: the Australian Securities and Investments Commission (ASIC), the Investment Industry Regulatory Organization of Canada (IIROC), the Central Bank of Ireland (CBI), the Financial Services Authority of Japan (JFSA), the Monetary Authority of Singapore (MAS), the New Zealand Financial Market Supervisory Authority (FMA), the Swiss Financial Market Supervisory Authority (FINMA。

Tier 1 liquidity providers are large banks, prime brokers and firms that trade currencies directly in the interbank market。For example, ABN AMRO, JPMorgan Chase, Deutsche Bank, Credit Suisse, Morgan Stanley, Citibank, UBS, Barclays Capital, Nomura Securities, DuGosbe, Venture Liquidity Providers Inc, Citadel Securities, etc.。

Forex brokers may shy away from fully disclosing their list of liquidity providers as this is highly confidential information in the industry。Even so, a true ECN broker must provide some information to gain public trust.。