Questions to ask broker to determine if they are ECN?

rom1

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Hi,

There may well be a thread on this already but I didn't see it.

I was wondering what questions I should asking brokers to determine whether they are genuinely ECN brokers or not?

So many seem to say they are ECN brokers, but it's becoming increasingly difficult to confirm which genuinely are and which aren't.

Thanks!
 
As a retail trader the only real ECN access you really have is to trade FX futures. Everything else is just a lie.
 
It's really hard but if you don't get your money after requesting withdrawal. You should think they are scam broker.
 
It's really hard but if you don't get your money after requesting withdrawal. You should think they are scam broker.

I better say why not checking the user reviews of the said broker before investing with them!! More important is to start with small amounts to check the broker internal processes like withdrawals.
 
Honestly only Interactive Brokers can be called ecn. Rest are either straight up market makers or stp brokers who b-books most trades and only passes on a few.
 
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read their TOS. It will say if they are a principle to the transaction.

Peter
 
HI
If you are worried about this ECN non ECN ( conflict of interest / transparency etc) why not consider EXCHANGE TRADED currency futures!Leverage 1:20 ( or more if day trading) / True Exchange / Availability of other currency derivatives like Option on Currency futures / Currency ETF s etc / Normal 100K and mini 10K contracts much better than OTC FX riddled with all these issues and dodgy operators
 
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Hi,

There may well be a thread on this already but I didn't see it.

I was wondering what questions I should asking brokers to determine whether they are genuinely ECN brokers or not?

So many seem to say they are ECN brokers, but it's becoming increasingly difficult to confirm which genuinely are and which aren't.

Thanks!

Ask their what is their clearing company or immediate LPs
 
Ask their what is their clearing company or immediate LPs

But they can often lie about this or refuse to provide.

Like wackypete2 suggested, check their TOS in the legal section of their websites. If they have anything like principal or counter party mentioned then they are not ecn.

Personally I've chked nearly all the major forex brokers and they are not ecn.
 
But they can often lie about this or refuse to provide.

Like wackypete2 suggested, check their TOS in the legal section of their websites. If they have anything like principal or counter party mentioned then they are not ecn.

Personally I've chked nearly all the major forex brokers and they are not ecn.

Even large one like FXCM?
what exactly made you think could you please pin point
 
Even large one like FXCM?
what exactly made you think could you please pin point

https://www.fxcm.com/open-account/

scroll down to Execution Disclaimer,

"Execution Disclaimer: FXCM aggregates bid and ask prices from a pool of liquidity providers and is the final counterparty when trading forex on FXCM's dealing desk and No Dealing Desk (NDD) execution models. With NDD, FXCM's platforms display the best-available direct bid and ask prices from the liquidity providers. In addition to the spread, the trading cost with NDD is a fixed lot-based commission at the open and close of the trade. While generally NDD accounts offer spreads with no markups, in some circumstances, FXCM may add a markup to NDD spreads. This may occur due to, but not limited to, account type, such as accounts opened through a referring agent. With dealing desk execution, FXCM can act as the dealer on any or all currency pairs. Backup liquidity providers fill in when FXCM does not act as the dealer. FXCM’s dealing desk has fewer liquidity providers than NDD. There are many other factors to consider when choosing an execution model (such as conflict of interest, trading style or strategy). See Execution Risks. Note: Contractual relationships with liquidity providers are consolidated through the firm's U.S. affiliate, Forex Capital Markets, LLC, which, in turn, provides technology and pricing to the group affiliate entities."

Peter
 
https://www.fxcm.com/open-account/

scroll down to Execution Disclaimer,

"Execution Disclaimer: FXCM aggregates bid and ask prices from a pool of liquidity providers and is the final counterparty when trading forex on FXCM's dealing desk and No Dealing Desk (NDD) execution models. With NDD, FXCM's platforms display the best-available direct bid and ask prices from the liquidity providers. In addition to the spread, the trading cost with NDD is a fixed lot-based commission at the open and close of the trade. While generally NDD accounts offer spreads with no markups, in some circumstances, FXCM may add a markup to NDD spreads. This may occur due to, but not limited to, account type, such as accounts opened through a referring agent. With dealing desk execution, FXCM can act as the dealer on any or all currency pairs. Backup liquidity providers fill in when FXCM does not act as the dealer. FXCM’s dealing desk has fewer liquidity providers than NDD. There are many other factors to consider when choosing an execution model (such as conflict of interest, trading style or strategy). See Execution Risks. Note: Contractual relationships with liquidity providers are consolidated through the firm's U.S. affiliate, Forex Capital Markets, LLC, which, in turn, provides technology and pricing to the group affiliate entities."

Peter
SO peter with an NDD a/c are you saying there could be conflict of interest same as a Market maker model? and thus FSCM NDD also is not ECN?
 
SO peter with an NDD a/c are you saying there could be conflict of interest same as a Market maker model? and thus FSCM NDD also is not ECN?

That is correct. FXCM is NOT an ECN, even if you are on the NDD model. The first line in the TOS says it clearly.

Peter
 
That is correct. FXCM is NOT an ECN, even if you are on the NDD model. The first line in the TOS says it clearly.

Peter

h...m
I guess then FX futures much better ,
- True regulated Exchange
- Good Intra day leverage
- both main and mini contract
- Availability of ETOs on the pair!
I guess a large OTC FFX broker "tries" to act as a pure exchange if there is enough interest from both side
The problem is "there is no guarantee that the broker will have that interest and may take on some risk themselves!
SO why bother with this entire ECN/ MM issue! :)
 
Hi,

There may well be a thread on this already but I didn't see it.

I was wondering what questions I should asking brokers to determine whether they are genuinely ECN brokers or not?

So many seem to say they are ECN brokers, but it's becoming increasingly difficult to confirm which genuinely are and which aren't.

Thanks!

For me this is more simple that people make it out to be and it's all in the conditions (trading rules) the broker offers.

For example, a true STP/DMA/ECN will offer core conditions spreads, execution rules and transparency. The broker I am using is Yadix, by going to the market watch, clicking on a pair and selecting specifications, you can see all you need to see. Yadix has no minimum market distances, it means that you can open and close orders in the same second if you like, and the market doesn't need to travel a minimum distance or your order doesn't need to stay open for a set time limit, many brokers do that to make life difficult for scalpers and arbitrage systems.

Also, spreads from 0 pips, average 0.2 on marjors, most fake ecns/stps will have a core spread of 0.4,0.5 or 0.6, this means that get the core spread from their bank feeds and add a markup so they earn on the spreads + commissions and worst still your losses.

Also, the conditions must make sense, a true stp won't charge $3 or $4 per lot traded as is wont make sense with the cost of liquidity and the bridge needed if they are not a market maker! If you think that the cost of decent liquidity starts from around $3 per lot and a bridge costs around $1, the broker would make a lose by charging $4, it means the only way they make money is on your losses and then there is a conflict of interest for you trading.
 
h...m
I guess then FX futures much better ,

That depends on what the trader is looking for. Many fx trader use spot fx brokers with success. Also if you believe the futures market is transparent with little or no scamming of the customer then you have a lot to learn. :rolleyes:

Peter
 
As a retail trader the only real ECN access you really have is to trade FX futures. Everything else is just a lie.

HI
If you are worried about this ECN non ECN ( conflict of interest / transparency etc) why not consider EXCHANGE TRADED currency futures!Leverage 1:20 ( or more if day trading) / True Exchange / Availability of other currency derivatives like Option on Currency futures / Currency ETF s etc / Normal 100K and mini 10K contracts much better than OTC FX riddled with all these issues and dodgy operators

The trading environment and market participants can be very different when comparing the futures market to FXCM's No Dealing Desk (NDD) forex execution, and it's important to understand how that could impact your trading.

Market participants in futures such as high frequency trading and similar highly sophisticated market makers are acting as both price makers and price takers. This can negatively impact quality of execution for a retail trader. That's because it's a speed race at the institutional level. If you break up the trading steps, at a very basic level, from receiving market data, making a trading decision and then placing the trade, institutional participants are trading in speeds measured in microseconds and even nanoseconds compared to a retail trader making trading decisions that take at least a few seconds.

HFTs on exchange spend millions of dollars on the fastest access to market data, customized computer systems for fast algo processing, and collocated servers to transmit trades as quickly as possible. You can read about the lengths institutional participants will go to by reading Flash Boys by Michael Lewis or take a look at the amounts of money being spent on telecommunications and collocation services by publicly traded market making firms such as Virtu. Institutional participants at the futures level put such a high priority on speed because in a trading venue filled with these super‐fast traders, the slowest person loses the race to be the first to trade.

Therefore, a safer route for institutional liquidity providers to take is to quote smaller sizes at wider prices to minimize margin of error of being picked off. Mistakes are very costly. If your algorithm is wrong, it's better to be wrong at a smaller amount and wider price. The risks involved make market making a fishing expedition based on speed where quality pricing and liquidity could be punished. The competition in the highly sophisticated institutional market is too great to provide the best pricing possible along with deep liquidity if the institution is exposed to the risk of being picked off by other fast and sophisticated market participants.

So if you're the average retail trader likely receiving information from a website or TV channel, over a regular cable internet line, manually placing trades from your average desktop computer, back over our internet connection with any latency involved, do you think you're going to beat the Virtu's of the world for the best price available?

How is FXCM's trading environment different?

On our NDD model for Standard and Active Trader accounts, liquidity providers are only allowed to be price makers and not price takers. Only retail clients are allowed to take pricing. The liquidity providers do not have to constantly watch their back, worrying about predatory high frequency trading because the liquidity providers are only allowed to be price makers for our retail clients. They know that liquidity provider A (who may be a predatory liquidity provider on the futures market) is not allowed to crossover and take a price from liquidity provider B. This gives our liquidity providers the ability to make a market based on quality of price and liquidity rather than speed to protect against being picked off by predatory trading from other liquidity providers.

liquidity-providers-figure-1-desktop.jpg

FXCM also provides Mini accounts with a dealing desk (DD) offering in which we act as the liquidity provider. This execution option is offered on smaller accounts in order to manage the risk. It's worth noting the base price used for DD execution on Mini accounts before adding the spread markup is the same base price used for NDD forex execution with the spread + commission pricing model. That's a key reason you can have confidence trading with FXCM regardless of the account type you choose.
 
Like wackypete2 suggested, check their TOS in the legal section of their websites. If they have anything like principal or counter party mentioned then they are not ecn.

Personally I've chked nearly all the major forex brokers and they are not ecn.

Even large one like FXCM?
what exactly made you think could you please pin point

https://www.fxcm.com/open-account/

scroll down to Execution Disclaimer,

"Execution Disclaimer: FXCM aggregates bid and ask prices from a pool of liquidity providers and is the final counterparty when trading forex on FXCM's dealing desk and No Dealing Desk (NDD) execution models. With NDD, FXCM's platforms display the best-available direct bid and ask prices from the liquidity providers. In addition to the spread, the trading cost with NDD is a fixed lot-based commission at the open and close of the trade. While generally NDD accounts offer spreads with no markups, in some circumstances, FXCM may add a markup to NDD spreads. This may occur due to, but not limited to, account type, such as accounts opened through a referring agent. With dealing desk execution, FXCM can act as the dealer on any or all currency pairs. Backup liquidity providers fill in when FXCM does not act as the dealer. FXCM’s dealing desk has fewer liquidity providers than NDD. There are many other factors to consider when choosing an execution model (such as conflict of interest, trading style or strategy). See Execution Risks. Note: Contractual relationships with liquidity providers are consolidated through the firm's U.S. affiliate, Forex Capital Markets, LLC, which, in turn, provides technology and pricing to the group affiliate entities."

Peter

It's important to understand that being your counterparty says nothing about the execution model we offer. In fact, all retail forex brokers are the counterparties of their clients, regardless of the execution models they use. That's because the major banks and financial instituations comprising the interbank market don't want to take on the counterparty risk of individual retail traders.

The key fact about FXCM's No Dealing Desk (NDD) forex execution is we do not profit from client losses, or lose from client profits, because we offset each client order one-for-one with the best prices from competing liquidity providers. Yes, we are simultaneously your counterparty and the counterparty to the liquidity providers on the other side of your trades. That's good for you, because it means if you lose on a particular trade, the bank on the other side comes to us, not you, for their money.
 
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