What is an ECN broker?

The benefits explained

For traders who value a trusted partner by their side

Formax is what is known as an ECN (Electronic Communications Network) broker. An ECN broker matches your trade with somebody else that is seeking the same trade on the open market. As the name suggests, this is done on a central electronic database.

There are some benefits to using an ECN broker over other types of broker. The most obvious is that our clients all receive market execution – meaning you get the current best market price on each trade. In addition, an ECN broker makes money based on the volume of trades our traders place and therefore we have an interest in your trading success. After all, we want you to keep coming back.

By way of comparison, a market-maker (or dealing desk) broker does not place your trade on the open market. Instead, they keep your trade ‘in-house’ – meaning they create the price you pay for a currency and squeeze it to their advantage by betting against you. In this sense, a market-maker broker only makes its money if your trade loses – and thus, they like inexperienced traders. This clearly raises a question around conflict of interest.

Receive market execution

You get the best price that the market is offering at that moment in time.

No conflict of interest

Unlike a market-maker, an ECN broker does not depend on its clients’ trades to fail in order to profit.

Variable spread

Receive the actual market spread rather than a (typically less competitive) fixed spread created by other brokers.

Trade with anonymity

Your trading status is anonymous so there is no bias to the rate you receive based on your trading experience.