Liquidity Providers ECN

Hi All,

After being with FXCM UK for a while and found out they were banned in the US for fraud i’m looking for a new broker. Preferably an ECN. Here and there on the net I’ve read about how ECN brokers scam you by “being” the liquidity provider themselves. So one of the things you can do to tell if a broker is “honest” is to check out their liquidity providers.

The only one I could find is Dukascopy who is open about this, but they dont use metatrader. I emailed other big broker firms and asked them about their liquidity providers most did not even bother to email me back or said they could not tell this due to non disclosure agreements.

How do others “deal” with this, or could someone tell me about an ECN broker (european regulated) who is open about this?

Thanks in advance!

You’re attributing an uwarranted significance to the letters “ECN”.

This post may help you: Market conditions awarness

Just use Oanda, and you don’t have to worry, is my suggestion.

Be careful about “European regulated”! You wouldn’t one regulated in Cyprus (I hope). That’s certainly not safe.

1 Like

In the past it may have been the case but it no longer is.
It’s been a common misconception for some time now (to be exact - since Cyprus joined the EU in 2004) that brokers regulated by CySec are unreliable. However, since it (Cyprus) is now a part of the EU all regulations that apply for English, German and French brokers (for example) also apply to the ones in Cyprus.
I stand to be corrected.

You’re completely mistaken, I’m afraid.

There are plenty of warning comments in the forum from people who have worked for these companies.

The reason some counterparty market-makers choose to be regulated in Cyprus is that in enables them to say, in their marketing materials, that they’re “EU regulated” without lying.

It’s very misleading, though, because Cyprus regulation is a joke, compared with (for example) UK regulation.

You’re mixing up your terms, I`m afraid.
Do not get confused by country regulation and EU regulation. All European standarts apply for all countries in the Union which on their own also choose to apply additional regulations.

Which might those be? What types of brokers are they? What’s their order exection? Are they really regulated by CySec? You’re talking in general terms without any proof.
Yes, there are cases of Cypriot companies being scams if you did some research (check CySec’s database) it would turn out that they were not regulated at all.
Such blanket statements can cause more harm than good. Not to mention that it helps spread the misguidedness amonst new traders that are looking to learn.
Cyprus’ regulation is tailored for companies to be able to operate with minimal cost (their tax laws and rates are amongst the lowest in the EU) without having to register as an off-shore company which in turn is a whole new pain to deal with.

Hi @mrjixies,

@LaughingCharlie is spot on in his response to you. It’s important to choose a well-regulated broker.

Not to pick on you personally (in fact, we posted similar responses to a few others on this forum recently), but your ECN comment reveals some misconceptions about the forex market we would like to address.

It’s worth noting that for institutional traders, our parent company, GAIN Capital, offers ECN solutions through the GTX marketplace. However, for retail traders, is a market maker, because we believe market making is the best way to provide our retail clients with reliable pricing at retail trade sizes while effectively managing our own risk. We are fully accountable for every execution and don’t outsource that responsibility to a third party.

It’s important to understand that if a particular retail forex broker tells you they are an ECN, that only means they must offset your trades with another firm that is a market maker. That’s because market makers perform a vital service, not only in forex, but in many financial markets, including major stock and futures exchanges.

Consider what the world’s largest stock exchange says about how their market model works:

The cornerstone of the NYSE market model is the Designated Market Maker (DMM). DMMs have obligations to maintain fair and orderly markets for their assigned securities. They operate both manually and electronically to facilitate price discovery during market opens, closes and during periods of trading imbalances or instability. This high touch approach is crucial for offering the best prices, dampening volatility, adding liquidity and enhancing value.

DMMs apply their market experience and judgment of dynamic trading conditions, macroeconomic news and industry-specific intelligence, to inform their decisions. A valuable resource for our listed company community, DMMs offer insights, while making capital commitments, maintaining market integrity, and supporting price discovery.

In the following post, we discuss the three methods retail forex brokers can use to offset your trades in greater detail: Who is the counterparty in an exchange?

Focusing on brokers that are regulated by reputable government authorities where you live can go a long way to addressing the concerns you raised. Key advantages of trading with a well-regulated broker is that there are:

  • minimum financial and trading standards they must meet,
  • ongoing monitoring by the regulators to ensure compliance,
  • a framework for handling complaints from customers, and
  • the power to enforce actions against regulated brokers for violations.

For example, the CFTC and NFA set the requirements a broker must meet in order to offer forex trading to US residents. Though not an exhaustive list, this membership application will give you an idea of some of those requirements: Compliance Requirements for Retail Foreign Exchange Dealer (RFED) Applicants | NFA

  • In the US, forex is regulated by the CFTC and NFA, and brokers are required to maintain net capital of $20 million.
  • In the UK, forex trading is regulated by the FCA and funds are protected for up to £50,000 per client by the FSCS.
  • In Canada, forex trading is regulated by IIROC and funds are protected for up to $1 million per client by the CIPF.

Thanks everyone for your elaborate answers! Indeed I had a wrong interpretation of an ECN account. At the moment I went with admiral market they are regulated by the FCA. I could not find out who their liquidity providers are but at the moment I cant find any other broker who does, except for Dukascopy.

1 Like