An ECN broker uses an electronic communication network with straight through processing (STP) enabling forex trading directly with liquidity providers without dealing desk interference resulting in ECN forex brokers achieving lower spreads and superior execution speeds than CFD market maker brokers.
Compare the best ECN brokers through the table below.
By Justin Grossbard / Updated: Sunday, November 17th, 2019
The overall rating is based on review by our experts
10 / 10
10 / 10
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Range of Markets
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Pepperstone’s Has The Fastest Trade Execution Speed
Pepperstone is the best forex broker in Australia, UK and Asia-Pacific when it comes to trade execution speeds. Their direct market access (DMA) leads to an exceptional ECN trading speeds thanks to two key features:
1) A direct optical fibre connection to trading servers
The sheer distance between Australia liquidity hubs can be a disadvantage for Australian traders. Pepperstone offset this through a direct optic fibre connection from Sydney to New York.
The end result is a reduction in up to 10x times latency for Australian and Asian-Pacific traders.
2) Usage Of Equinix Servers
Just having a fast connection isn’t enough if the server has a poor response rate.
To overcome this, Pepperstone partnered with Equinix that have servers near Wall Street. Equinix houses over 60 exchanges and over 400 sell and buy side firms.
Not only do currency exchange firms use these servers but also banks which Pepperstone can directly exchange data with.
Pepperstone Offers 3 Main ECN Platforms
One of the things that make Pepperstone perhaps the best forex broker is the broad choice of platforms they provide for customers. Below we review the 3 most popular platforms:
1) MetaTrader 4
This is the worlds most popular ECN forex platform due to the easy to use interface. This interface also offers enhanced charting to track detailed market fluctuations.
MetaTrader also offers an expert order management tool providing control to traders. The platform uses MQL language for developers and Expert Advisors for automated strategies.
cTrader was created by forex traders with the focus of creating a user friendly platform. Features include detachable charts, pre-set charting options and an easy order system.
By using cTrader Pepperstone can access liquidity from Goldman Sacks and other institutions. By accessing tier on liquidity providers low spread can be achieved on most currency pairings.
There is also the ability to conduct automated trader and a back-testing facility for strategies.
3) MetaTrader 5
Metatrader 5 (MT5) shouldn’t be viewed as a newer version of MT4 but rather a platform suited for those looking to trade more than just forex. The MT5 platform has superior CFD trading functions and analysis and if built in the MQL5 language with similar syntax to that of C++ programming language. It also has:
Pepperstone offers 500:1 spreads which is high considering it’s one of the elite ECN forex brokers. It is even higher than several others as shown in the comparison table below.
500:1 is extremely high both by local and international standards and means that you can effectively trade 500 times your deposit. This means that a $100 deposit will allow up to $500,000 on currency markets maximising both profit potential and the associated risks. An example is a movement in currency of 0.02% which is relatively modest would almost leave a trader to either double their money or lose the whole amount.
Pepperstone allow scalping and real time foreign exchange data for automated trades that rely on 500:1 leverage. Market access to the full range of financial instruments of the key reason why the forex ECN broker dominates automated traders.
Pepperstone’s Analysed Spreads
Pepperstone is one of Australia’s fastest growing companies not only based on their execution fees but also their spread. With no dealing desk (NDD) on the Razor trading account spreads can be as low as 0.0 pips. This is on-par with other financial institutions intra-bank rates that most retail traders cant achieve.
Below shows Pepperstone variable spreads as of June 2019. As the table highlights, many major currency pairings start at 0.0 and average at approx. 0.3 for Razor ECN accounts which also has additional minor trading commissions. The standard account on the other hand has no commission but variable spreads are higher.
The main competitor to the Pepperstone Razor account is the True ECN offered by IC Markets which are also one of Australia’s no dealing desk brokers (NDD). The True ECN for MetaTrader has the same commission of $3.50 per side ($7 per round turn) which their cTrader True ECN trading account has a slightly higher commission of $3.00 USD per side. A full IC Markets vs Pepperstone comparison table compares the two.
Ways To Fund Your Pepperstone Account
Accounts can be funded through a variety of payment methods including credit cards, bank transfers and bPay. In fact, all major payment portals are offered by Pepperstone with the exception of PayPal which isn’t offered by all forex brokers due to the high merchant fees they charge the companies.
All traders can open a demo account and a live account. A demo account provides real-life trading conditions allowing individuals to test trading strategies prior to opening a live account. Some elements like re-quotes of slippage many not exactly simulated compared to a live account which should be factored. That said the trading conditions are close enough to get a feel for forex markets and trading forex in general.
Minimum Deposit Requirements
The initial deposit required by Pepperstone if $200 USD. This is approximately $300 Australian Dollars but their website says the minimum is not actively enforced. This means that smaller minimum deposits is often accepted.
Markets Available To Trade With Pepperstone
There are five core markets Pepperstone offers forex traders with various leverage levels. Overall, there are of 150 instruments offered by the ECN forex broker.
1) Forex Trading
Currency trading is the most popular instrument worldwide with $1.5 trillion traded on the forex market each day. Pepperstone not only offers a true ECN forex trading environment but also offers over 60 currency pairs with leverage up to 500:1.
2) Share CFDs
With a leverage of 10:1, individuals can trade over 50 of the most US stocks. A short or long position through a share CFD can be held so you can predict increases or decrease in share price value.
3) Index CFDs
Similar to a share CFD, index CFDs allows traders to predict upward or downward movements on the 14 major stock market indices in the world. This includes the Australian 200, UK 100 to US Wall Street 30 Index.
There is the option to trade different commodity classes with leverage to profit/loss based on price movements. The most popular asset classes include gold and silver, platinum and palladium, soft commodities and energy including oil. These commodities can be traded in relation to the Australia dollar, US dollar or the Euro.
Crypto is traditionally volatile and with leverage offered by Pepperstone of 5:1, this can lead to high profits and losses. The cryptocurrency pairings offered are Bitcoin, Bitcoin Cash, Ethereum, Dash and Litecoin. These should only be traded both those with a high-risk appetite.
The only financial service they don’t offer is stockbroking services which may lead some traders to choose a different broker. That said, those looking for a low fee broker with the best forex broker trading platform and currency trading options, Pepperstone is the logical option.
ECN stands for ‘Electronic Communication Networks’ and in simplistic terms it allows forex trading direct access to deep liquidity pools on the interbank market. This means that similar to the stock market you can execute trades directly with other participants in the market with the ability to see buy/sell orders (or in currency markets bid/ask spreads).
ECN Forex brokers essentially match trades between individuals and can’t make trades against their own clients. This provides peace of mind for some forex traders as they may be worried that the broker may trade against them which has occurred in the past by poorly regulated and run brokers.
The opposite of an ECN is a ‘market maker’ forex broker. These brokers can make both ask and bid prices which they can take from their customers. This means that the forex broker will take the opposite position to their traders positions and must buy/sell from you when trades are made. These brokers often have higher spreads but may offer some enhanced features such as ‘guaranteed stops’ which may make them more suitable for beginner traders.
How does an ECN help?
Electronic Communications Networks or ECNs essentially help speed up the settlement of trades between brokerage houses and individual traders. With an ECN, no 3rd party or middle man exists. This helps to reduce settlement costs as there is one less party involved in a trade that needs to get paid.
An ECN also helps by allowing traders in a range of geographical locations right around the world to access markets no matter where they are. It also allows them to trade quickly and seamlessly.
What is straight through processing or STP?
Straight through processing or STP is another name that describes a true ECN broker. Brokers that offer STP on their platforms, place client orders directly with liquidity providers such as banks or institutional brokers without them passing through a dealing desk. Not only does this promote faster trade execution speeds, STPs also allow for greater market depth and transparency. The same bid/ask prices (spreads) are passed onto the client but STP brokers are usually compensated for offering this service via a small fee/commission.
Australian Business & Company Number
Pepperstone is regulated in Australia by ASIC and the FCA in the UK and is audited by Ernst & Young. This means they must meet strict guidelines such as training standards, avoid conflict of interest and the requirements for customers deposits to be segregated in a separate account. They are not regulated by CYSEC which may limit some market participants. They are one of the largest Australian forex brokers and are gaining market share in the United Kingdom where they are relatively a newcomer.
Compare forex brokers was created by a team that has worked with forex providers over several years. The aim of their comparison tables has been to simplify the process of comparing brokers to find the best forex broker for individual Australian forex trader’s needs. Another review of Pepperstone exists in the Australia section. The tables were made based on information from true ECN broker websites and market maker websites with no automation used to compile information on the tables or reviews.
Published by Justin Grossbard
Sunday, November 17th, 2019
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