In simple terms, an ECN broker is a broker that leverages electronic communications networks (ECNs) to provide clients with direct access to other participants in the market.

There are three main types of brokers:

1. Market makers 

2.ECN and 

3.STP

Each of these types has its pros and cons and often inexperienced traders have a hard time determining the best type of broker for their needs.

 Market makers are very popular but they are also one of the worst types of brokers you can choose because they win if you lose money and vice versa

 If you want to work with reputable trustworthy and friendly brokers then you should focus on ECN/ STP brokers.

There are two main categories of brokers:

On the Forex market and the first one comprises the so-called DEALING DESK Brokers DD also known as MARKET MAKERS as the name implies such brokerage companies make the markets by determining the bid and ask spreads via their dealing desks.

Customer’s orders are never quoted on the exact market prices because of the built-in spread that ensures a profit for the DD brokers another peculiarity of market makers is they sometimes issue re-quotes because customers orders are not routed directly to the interbank markets the market maker chooses to either accept or decline a client's order depending on different circumstances such as volatility and news reports it the best case scenario your positions are matched against those of other customers however if this proves impossible a DD broker would either take a counter trade or pass the position to another liquidity provider.

A DD broker usually pays for winning trades straight from its account respectively one such brokerage wins money when its customers close their positions at a loss and vice versa.

NDD (No Dealing Desk)

No Dealing Desk NDD brokers which rely on straight through processing STP or electronic communication network.

ECN technologies to route their clients orders straight to other liquidity providers this provides traders with direct access to the interbank markets where their orders are filled faster and at better prices an NDD broker basically plays the role of a bridge between its customers and the other liquidity providers there are no re-quotes on orders when one works with an NDD broker.

The trader is exposed to multiple liquidity pools which enables them to get the best BID and ASK prices another difference is that NDD brokers charge additional commissions for passing the spreads from liquidity providers to customers ECN brokers rely on the so-called electronic communication networks ECN for their operations this is a digital system that matches up buy and sell orders for financial products automatically Forex currency pairs and stocks are the two most common products traded via this computerized network.

The ECN system links major broker’s individual traders and liquidity providers enabling them to execute trades directly between themselves without the need for using the services of any middlemen this ensures high levels of anonymity for traders who use ECN brokers the ECN model offers several other advantages from the perspective of retail traders including lower spreads, faster execution of the orders improved liquidity and price transparency.

The ECN also enables financial institutions to decrease their overall costs because it reduces manual effort the  Best ECN brokers give the trader direct access to the real interbank market this means the brokers profits and losses are not based on the success of traders instead ECN brokers rely on commissions to make money the electronic communication network connects traders directly with the broker's liquidity providers rather than trading against your broker you trade against other market participants such as banking institutions larger brokerages hedge funds private traders and so on.



 All of these entities are essentially trading against one another by offering their sharpest buy and sell

Prices to others this provides ECN brokers customers with access to the depth of market which renders the manipulation of market prices impossible the depth of market contains all quoted prices for a given market along with the proposed trading volume for each bid and ask quote level traders get the chance

to compare their order execution prices with those of other market participants who have access to the same price feed another important thing to point out is that liquidity providers compete with each other for greater trading volumes which motivates them to offer better quotes ECN orders are sent at the most competitive prices however when liquidity is insufficient to fill them the second best prices are used.


ECN do not rely on bid and ask spreads or markups to generate revenue instead they profit by charging

customers a nominal fixed commission on each position they open in most cases this commission is ten

dollars per round lot but it might be less or more depending on different factors ECN brokers are becoming the preferred choice of many traders because they offer them multiple advantages:

The interests of customers and brokers are perfectly aligned because ECN brokers never trade against

their clientele, your orders are matched with those of other participants in the markets the ECN broker merely serves as an intermediary between the market participants whether your trades win or lose is

irrelevant in this case because the broker profits from the commissions it charges.

It is actually beneficial for an ECN broker if their clients win money this enables them to grow their accounts and trade more sizable volumes which works well for the broker the manipulation of market prices is impossible with ECN brokers which ensures fair and fully transparent trading conditions for their customers this is so because such brokerages display market prices from multiple liquidity providers instead of setting their own bid and ask prices as is the case with market makers.

 

ECN clients also have direct access to the depth of market which further facilitates transparency trades are executed immediately and at much sharper spreads than those offered by market makers

many different liquidity providers are competing for trading orders; this motives them to offer the tightest possible prices in an attempt to win traders over and beat the competition.

The access to real-time interbank prices prevents the issuing of re-quotes this is a common problem among those who use the services of market makers re-quoting has a negative influence on your long-term trading performance, it normally occurs when a broker declines to fill an order due to changes in the traded assets market price the re-quotes offered by market makers rarely work to the advantage of traders.