There are many types of traders on the foreign currency exchange market. For example, there are the big tier-1 banks, lower-tiered banks, companies, and individuals.

Anyone can participate in forex trade; all you need is internet connectivity and a trading platform.

Brokers offer the trading platform that connects each type of trader to the rest of the market. Electronic Communications Network (ECN) brokers are the major players in forex brokerage and offer instantaneous quotes and immediate transaction capability.

These ECN forex brokers make their money by charging bid/ask spreads and commissions.

What Exactly Is A Forex ECN Broker?

Forex ECN brokers are typically financial experts who are big market players.

They make use of technologically advanced electronic communications networks to provide their customers with direct access to the global FX market.

They also provide communication platforms that enable their clients to purchase and sell currency.

ECN brokers do not set currency prices, they simply offer currency based on market rates. What ECN brokers do is that they deal directly with tier-1 banks through the interbank market and thus provide the best rates for their clients.

They constantly analyze currency price feeds and process customer orders based on these. They merge these interbank price quotations to formulate the bid/ask spreads and commissions that they charge their clients.

ECN brokers typically can afford to offer extremely thin bid/ask spreads since they tend to deal with very large sales volumes.

Forex Services Provided By ECN Brokers

ECN brokers provide a variety of services for their clients. First, they make transactions on behalf of their clients.

These transactions include the buying and selling of currency. For this, they normally charge bid/ask spreads.

ECN brokers are also renowned for their superior software products and it is for this reason that they are a favorite of big market traders. Their platforms usually have no re-quotes and have instant transaction capabilities.

There is almost always high liquidity for any currency you choose to trade when working with an ECN broker. This is because they directly deal with the interbank market.

ECN brokers also negotiate on behalf of their clients. For this, they normally charge a commission on the amount involved in the negotiations though they might also charge a fixed fee no matter the size of the transaction being negotiated.

ECN brokers also provide consultation, trading advice, and help in creating investment portfolios.

ECN Broker Fees

The main difference between ECN brokers and market makers is that they do not fix their bid/ask prices and instead rely on a transparent, market-influenced system for setting bid/ask spreads.

It is for this reason that they have no reason whatsoever to manipulate currency prices or trade against their clients.

In fact, some ECN brokers do away completely with bid/ask spreads and charge a standard commission on all transaction. These commissions usually range between 1 and 5 pips based on the transaction amount, whether the trade is profitable or not.

Therefore, for an ECN broker who charges a 1-pip commission, you will pay a $1 dollar commission for every $10,000 you transact. ECN brokers’ commissions are usually less than a pip and are charged each time you enter or exit a trade.

Where an ECN broker charges bid/ask spreads, you will find that they are much thinner than the spreads charged by other market makers.

Click this link if you want to read more on how to choose the best ECN broker.