Each time the Traders have a greater variety of options to do Trading and when choosing Broker we always have doubts. Recently most traders had no answer if you asked what is an ECN / STP Broker? but “thanks” to the number of Brokers that emerge under the stones and the information they provide us … every time we know more about their execution and their liquidity providers.
However, the scams never stop disappearing, it is more now they are booming. As most Traders look for a good ECN / STP Broker to open an account …
Many of them claim to be ECN or NDD without it. This you must take into account. So…
What is the difference between a real ECN Broker and a False one?
ECN stands for Electronic Communications Network. An ECN Broker is the one that your platform is electronically connected to the network of international banks or liquidity providers. Currency trading through a platform of this type means that it is communicating and operating through a supplier that launches all its operations to the Real Market.
STP is synonymous with Straight Through Processing. This means that everything from placing the orders is done automatically and electrically without any manual intervention.
Do you mean that if a Broker is connected electronically and without any human intervention connected to a liquidity provider, is it an ECN / STP broker?
Technically speaking, yes. But it also happens that the provider of liquidity are themselves with another name, being Market creators … They will tell you that they are ECN because your orders go to the supplier but they are themselves, conclusion, the money goes to the same pocket and its only objective is that you lose it.
Why do they do this?
Simply to differentiate yourself from others and have an incentive for the customer, it is now fashionable to say that you operate in an ECN Broker, but do you think that € 5,000 or € 10,000 will be sent to the Market? Those accounts are cannon fodder, they know that sooner or later they will fall into their pockets.
Who is a true ECN / STP?
A true ECN / STP Broker is the one that has its platform connected to a high volume intermediary bank, such as Bank of America, Goldman Sachs, JP Morgan, Citi Bank, HSBC . That they have nothing to do with the Broker and there is no relationship between them. The Broker only sends its operations to the liquidity provider. The provider makes money through Spread or commissions and the Broker makes money through its increase in such spreads or commissions. We pay the difference for the service provided.
Today, True ECN Broker is connected to several liquidity providers at the same time. When an operation is launched the system automatically selects the liquidity provider that is offering the best price and the order is sent to that supplier.
Therefore, the operations are distributed among several liquidity providers and none of them will have any opportunity to know the account to go against them, in case money is earned. This provides the best possible service for e Trader because liquidity providers compete with each other, offer lower spread each day and that is very good for retail traders. Some brokers are true ECN / STP, but increase the spread in addition to the commission that They charge. What they add to the spread is called profit margin. They are not allowed to do that , unless the clients know and give their consent. However, many of them do not inform clients about this hidden commission and when asked why the spread is so high they respond that it is the normal market spread, that is a lie. Therefore, even a true ECN / STP Broker can fool you.
How do we know that Broker is a true ECN?
Well, I’m sorry to tell you that it’s difficult, I’ll tell you more … we’ll never know, if the banking system itself is a scam and they use our money at their whim, imagine the Brokers.
My advice is that you open account in a broker known and that has many customers ,so if there are problems “always have money to solve it.” Also tell you to worry about winning, if you do, you will see how your operations will go if they go to Real Market !.