Are ECN brokers a scam?

There are several trends in the Forex and trading retail markets nowadays.

One that seems to be very popular is the fact that more and more brokers are claiming that they are ECN brokers, especially the new ones that come from the four corners of the World.

How do we know that the broker X, seemingly an ECN, is truly one, especially when that broker is based in Belize or Bermuda?

We cannot, obviously, know the same as we do not know if the brokers really segregate our funds.

They say they do, however, one thing is saying another thing is “doing”.

Since the beginning of days people try to sell products using all sort of promises which in many cases are nothing else than smokescreens.

Before there used to be those guys selling products for hair growth or any kind of miraculous thing.

Nowadays we have people saying: “we are this”.

But there is no way you can verify that.

You just have to believe.

The truth is that in this material plane the things that counts are those related to the senses.

If we “see” something it must be true.

The problem is that we do not know what really happens under the cover most times.

It is what is unseen what is important.


Therefore, do we believe this supposed ECN brokers or no?

Well, after all many of them may actually tell us the truth.

Actually most of them are telling us the truth.

What they do is to make a deal with a liquidity provider and pass our order to their book. The broker simply keeps some mark-up in the spread and commission.

The problem and what they do not tell us, is that those liquidity providers are actually market makers in many cases.

True ECN broker

So, broker A, a market maker, offers liquidity to broker B and charges 0.5 pips in the spread. Our ECN broker adds 0.5 spread and 0.5 in commission and voila, we have an “ECN broker”.

In reality they are just passing their orders to some of the big market makers out there.

In the end we depend on the fact that the brokers we work with are honest, being market makers or not.

As I said already, there are good and bad ECN Forex brokers as there are good and bad market maker brokers.

That is why we have to be quite careful when we trade in this kind of markets.

It is better for us not to use too big accounts but rather small or medium sized ones.

The retail markets in this kind of derivatives are better for us to learn, not to trade 50.000 GBP or USD accounts.

When we have learnt and our capital has reached a significant amount, then it is time to trade futures or stock markets, the true ECN markets.

Although, it does not mean that there are some sort of market making in those markets.

There are market makers in all markets after all. Those entities are necessary for the markets. Without them there is not liquidity, without liquidity there is no markets.

Can an ECN broker eliminate my trades?

Well, it seems so, for the simple reason that its providers are actually market makers.

Some time ago I saw the case of a well know Forex broker, which had a legal fight with a customer, in which the broker had deleted some trades.

The trader, supposedly, had done some consecutive trades in the same day, making his account multiplied by several factors.

The truth is that the case in itself was a bit strange, but there are many cases of that kind, of people whom had big profits using scalping systems and big leverage. It can happen, certainly.

Then if you do that in an ECN broker there should not be any problem, should it?

Just imagine a futures broker that tells you they have to delete your traders from yesterday because they seem suspicious.

It does not make sense, does it?

If you scalp the markets in futures for one day, 20 or 30 times with some leverage and you triple your account, there should be no issue at all.

If you win, you win, period.

You can also lose all your capital in 2 hours.

Well, in the case I am talking about the broker and its liquidity provider (LP) said that the prices that they offered in their platform were not real in those moments (sic). Therefore the LP removed them from their system and also the ECN broker.

The trader, obviously, did not accept this.

As you can see, there does not seem to be a true “ECN market”

If the LP can delete the orders at will, then it seems that those orders were not real in first place.

What kind of market is that? Is not it a market maker market?

That is one example where you can see that many of the so called ECN brokers are not really so ECN.

This kind of derivatives markets is amazing but there are many problems in them.

CFDs, Forex or binary are very difficult markets to win.

If we want to survive for a while and learn we had better be conservative and try to choose wisely and trade modestly.

The Forex markets are quite complex and complicated.

We can find amazing market maker brokers. Actually many of the best brokers are market makers.

Finally, we should not open an account in a broker just because it says it is an ECN.

We should open an account in that broker because we like it and we see it has a good reputation and conditions.

After that we just need to focus, trade and learn.