How can you tell if a broker is truly ECN or just claiming to be?

It’s not easy.

For several reasons.

For example, they can connect all trades automatically to a liquidity provider which they themselves own (or which owns them), and in practice they’re not necessarily (unless there’s a top-tier regulator involved) obliged to disclose that information to their customers.

As you can understand, that makes whether they’re “ECN”/STP” somewhat academic, because they’re your counterparty, either way.

Don’t imagine that this scenario is some kind of “obscure rarity” or anything of the kind. It’s actually very common, in the industry.

The reliable way to know whether a brokerage is genuinely STP/ECN comes from a combination of two things: if they say they are, and say expressly that they’re not the counterparty to their customers’ trades AND if they’re also regulated by a top-tier regulator, then the information’s reliable.

The reason for that is that top-tier regulators (but no others!) routinely and regularly inspect all the statements made to customers and potential customers on the websites of the brokerages they regulate, and employ highly-qualified, highly-trained staff to check their veracity. In very simple terms, properly regulated brokers know perfectly well that they can’t get with anything underhand or misleading.

An example of this is FXCM. They themselves owned one of their so-called “liquidity providers”, and weren’t therefore being honest with their customers about whether or not they were counterparties. The CFTC caught them out over this, and as a result they were kicked out of the U.S. and no longer allowed to be a broker there. So, as you can see, this stuff is really taken pretty seriously.

Other regulators (“subscription service regulators”) don’t do this at all, and offer the public no real protection.

I believe that anyone who’s actually worked in the industry would tell you exactly the same thing: it all boils down to “under which regulator your account is held”.

Sorry if I keep going on about this issue, in responding to your questions, but (in addition to being very widely - almost universally among aspiring forex traders! - misunderstood), for forex trading it really IS the single, big, important issue on which everything else depends. :wink:

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