Is there a way to actually tell if they are an ECN broker?
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itâs very difficult to find real ECN.
If your broker guarantees a fixed spread without commissions, this is not an ECN.
In addition, usually, if a market maker thinks youâre a good trader and he will lose monney taking positions against to you : he will put your account in STP mode (straight through pass), so you will enter the market with less risk than with an ECN.
A true ECN broker will charge commissions and not have a Dealing Desk. Those are the two main things to look for. If a broker doesnât charge commissions and makes their money âstrictlyâ from the spread, then theyâre not an ECN.
As for this suggestion:
I donât think so.
How could a Market Maker possibly let you enter the market with less risk than an ECN?
âSTP modeâ [I]is[/I] an ECN. Your order is passed directly to the market. Market Makers do not do that. If they did, then theyâd be ECNâs. :rolleyes:
The term Market Maker refers to the fact that they make their own market. In other words, their prices are artificial, created by them, and not the actual prices of the market that you would see through an ECN. Thatâs why prices will vary from one Market Maker to another, because theyâre not actual market prices, but ones created by the broker for their clients.
If a Market Maker thinks you are too good a trader, then what they will do is put you on manual execution, which means that your orders do not get executed instantly via their computer system, but they go through a trader at their Dealing Desk who manually puts it through. This causes delays and makes [I]sure[/I] that the Market Maker can take a position against you.
Terry
Yes Terry is right. With an ECN there will be commissions, variable spreads, no part lot trades and usually a high deposit requirement. Dukascopy is my ECN broker so check out their site which will give you an idea of the differences
youâre right.
also every market maker has a risk management business model. Generally they started the business with STP, taking spreads.
After which they allocated a part in risk activity, but this part is never 100%.
Unlike an ECN type model, a deal desk doesnât have any banks in the quote to the customer. They are the quote.
They can quote wherever they want (within reason), as long as they are executing customers with stops and limits at the bids and offers that they hit.
Most deal desks usually observe one or more direct access feeds for cross reference. The general idea behind a deal desk operation is that they have equal buy and sell orders during each shift across their book, and to a large extent, they capture the spread or better.
But if a chunk of customers start buying Cable and the MM feel like they are getting too short, they need to buy it themselves. They do this by tapping into their suppliers/bank feeds. These are the prices they watch that inform them where the approx true market quote is, and they use this knowledge to move their own quote and execute customer trades.
Say they have a small selection of bank feeds that shows the Cable at 2.0640by 2.0642 & change.
They have their current quote sitting at 2.0640 by 2.0644. They see on their grid that a clutch of customers have stop orders to sell at 2.0637.
They can move their quote down to 2.0637 and trigger those sell orders, which they buy. They know they can hit their bank feeds at 2.0640 and make 3 easy, quick pips. This is the task of the deal desk trader. He/they decide whether to hit the 2.0640 bank bid or hold the long position for prices to move up.
If they then move their quote up a couple of pips, some customers think itâs going up and they buy at the offer, which means they are selling at 2.0644, making good money. But the whole time, they had ďż˝flat to evenďż˝ risk because they could hit the bank separately.
You, the customer donât see their suppliers feed on a deal desk system. And in fact, the real market never touched 2.0637 at all. Good hey?
This is where the major difference lies regards ECN v/s Deal Desk execution. You will directly hit bids, offers & actually trade inside the 2 from a variety of avenues (Banks & competing traders) within the price engine of an ECN. Whereas executing through a traditional FX broker, youâre being shaded or shielded from the live price mechanism - therefore trading in via a middleman.
Fact is, some trade blocks will be ďż˝warehousedďż˝ by the broker, whilst other positions will be instantly cleared. But as the vast percentage of retail trades are below ânormal market sizedâ amounts (i.e. below the minimum trade size threshold to clear) they are simply absorbed.
The broker isnďż˝t necessarily always trading against you, the customer. Most of the time they are simply managing their order flows & percentage book so that theyďż˝re working & operating within their business model structure. Of course they run stops occasionally, but so does the rest of the market. Sometimes itâs more in fear than greed.
You also have to appreciate most of the larger shops & firms see, or certainly have access/information to, the proper flows from hedge funds & CTAďż˝s etc, in decent directional size. Theyâre often more busy watching & assessing that business than anything else.
Thanks alot guys, my question was definetly answered and I thank youâs for that.
To JimmyMac :
I like your explanation - it was nice and comprehensive. But you could have used round figures in your example, since you are only explaining a point.
2 decimal places with round figures would be sufficient.
I say this as a retired school teacher who, therefore, fully understands the importance of keeping things simple for your readers.
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I have been in the same position as you before, that was why I have spent weeks searching for the best FX broker on the net. It turns out that most FX companies on the net are total crap, but there are some good ones. The one that really sticks out is ACM which is a true ECN/STP broker which only makes money from the spreads. Although you do need some serious cash to open an account with them; US$ 2,000 for a mini and US$ 5,000 for standard. I cant tell you that this is the absolute truth, but I do know 3 other people on live accounts that have confirmed this. I will post back again when I open a live account with them too. I hope I have helped some. 
I have heard to completly avoid ACM because they claim to be an ECN broker but really are not. Dont know how true it is, forexbastards.com really grills them (but who doesnt it grill i guess). Another thing is that 2000-5000 really isnt alot of money to open an account and they also dont charge a commission, which kind of makes me believe they are not ECN. I was also speaking to them on the phone and the told me that they simply do not allow scalping (due to expired quotes) so that is another thing that makes me hesitant with them. If the were real ECN this wouldnt make a difference. Theyâre site says that they are ISO 9001 and ISO 27001 certified, does anyone know what that means?
No comms, fixed spreads (regardless of how tight they are) is the 1st red flag.
Ask them how many liquidity providers theyâre linking into 
Then ask them who the liquidity provider [B]IS [/B] (note the singular!!!)
ISO is merely a fancy quality assurance certificate. All service related firms have it as standard. Means jack s*** as far as trading recognition goes.
Your skepticism is healthy regards this outfit. Continue to do your due diligence & trust your common sense conclusions 
Delve a little more into the [B][U]REGULATION[/U][/B], particularly how it relates to you as a non-resident of Switzerland.
Thanks for the info JimmyMac, i chose to not use them as my broker anyway, although im still in the market for a broke that is truly going to fulfil my needs. I think i may try MB Trading for my first broker though. I like there platform, they do charge commission, scalping (although im not a scalper) is completly accepted by them, and on top of this they have been recommended by many and I havent read too many bad reviews.
Thnaks for the help JimmyMac, happy trading
Yes I use MB trading if I want to put on lot sizes smaller than my ECN platform allows (take note of this!). You need to be aware that they are VERY expensive charging a commission well in excess of my ECN plaform
Have you looked at [I]Interactive Brokers [/I]at all? Offices in the U.S & London.
They offer a multitude of instrument choice, & carry a lot of positive weight from people out there.
Comms are pretty competative so I understand, & again fills are generally adequate on the FX side of things according to the comments.
Might be worth investigation.
Thanks for this JimmyMac. Had a quick look at whats on offer and like what I see
Youâre welcome.
I donât have an account there currently, but Iâve done business with them in the past. One of my brothers worked in Greenwich on one of their desks back in the late 90âs, + theyâve been around for 30 odd years, so they got decent history.
Theyâre not perfect, but who are? Main thing is, you get direct market access at fair costs, & their entry level a/c funding suits most semi-serious pockets.
Range of products is probably their big draw.
[B]PS;[/B] I think theyâve got exposure in Sydney if Iâm not mistaken? for you Oz fellaâs.
Exactly. That is another sign that theyâre not an ECN, as well as fixed spreads and no commissions, as already mentioned.
Also, a true ECN cannot guarantee no slippage, as their prices are true market prices, not fixed by them.
Hereâs an interesting article for those comparing Market Makers to ECNâs:
Market Makers & ECN�s, Is the grass greener?
Terry
thank you for the article in2blues, thats exactly what i was looking for. Aparrently theres a bit more i have to learn about both kinds of brokers. To me (this may be a generally accepted comment) it just doesnt make sence to go with a market maker. Why would you want to deal with a broker who even has the possibility to trade against you to make there money? I mean ECN does have its down falls like -no garunteed slippage, but i am yet to even read a review about a site that garuntees no slippage that doesnt complaign about there being slippage. In my opinion slippage is a part of forex. Its impossible to completly remove it. I think for any newbies (which i am)out there that are reading this âŚDo your homework. Its 2 different games.
Thanks for the tips everyone. Your help is much appreciated
Well I would say there are pros and cons depending on the model you trade. I do use a couple of models where the fixed spread of a retail broker including through news times is of benefit. As you say there is a lot to understand
Terry- This is exactly what happend to me with I-Trade FX - What you are talking about with a âMarket Makersâ, their demo account will let all my orders go smoothly, however in a REAL account when I try to open or close a position, they give a âDealer evaluationâŚetc etcâ message (big delay for scalping) and I always lose the trade against my favor.
I didnât know this at the time - I am very glad to read this, as now it makes sense.