CFDs and Forex brokers Pepperstone and City Index offer MetaTrader 4 and WebTrader trading platforms. Both brokers have ASIC and FCA regulations with Pepperstone offering ECN style spreads for 64 currency pairs from 0.0 pips. City Index offers 84 pairs, risk tools, and spreads from 0.5 pips.
Before one compares the spreads of each broker, it is important to understand why each broker is different and the different trading account types they offer for forex trading.
Pepperstone can be thought of as an Electronic Communication Network (ECN) plus Straight Through Processing (STP) ‘style’ broker. While a ‘True ECN’ or STP broker will use an external electronic trading system, Pepperstone maintains ownership of the electronic systems for the products they issue.
If you a looking to trade via ECN/STP, the fact Pepperstone is not a ‘true’ provider need not concern you. Very few brokers are actually ‘true’ ECN providers. What is more important is that Pepperstone sources their pricing using a deep pool of reputable external liquidity providers and pass these prices directly to you. Pepperstone is able to provide low spreads because they have no dealing desk, no requotes, and don’t manipulate prices.
As spreads are set by the market, Pepperstone will add a flat one pip the spreads (in the case of standard account) or $7 commission (round-turn) in the case of Razor account (when using MT5) or 7 units for the base currency you are trading if you are using cTrader i.e. AUD/USD will cost $7 AUD for each lot you trade.
Both trading accounts offer the following base currencies: AUD, USD, JPY, GBP, EUR, CAD, CHF, NZD, SGD and HKD. View the razor vs standard account table if you need more details comparing the two most popular Pepperstone accounts.
Although not advertised on their website, Pepperstone offers an Islamic account designed to satisfy Sharia Law, which forbids Muslims from receiving or paying swaps. This account will have the same spreads as the Razor account but does not have rollover interest or overnight fees.
In place of swap fees, an administration fee is charged. Fees for major currency pairs will be under $10, while minors will be under $20. Exotic currency pairs will be higher.
City Index is a market maker. This simply means they are the counterparty to every trade you do.
As the dealing desk broker, City Index incorporates their fees into their spreads, this means there are no commissions.
With the above explanation in mind, the Pepperstone Standard account spreads can be fairly compared to both City Index accounts. The Pepperstone Razor account spreads are cheaper, but don’t take into account the commission that will be added with your trade.
A look at these spreads and we can quickly see that using MetaTrader 4 with City Index is going to be the most costly option. If you are looking to trade with the MetaTrader platform, you would be better to trade with Pepperstone (or most other brokers) than City Index.
If you are dealing with Pepperstone Razor Account, then you will have a commission of $3.50 each way (when using MetaTrader 4/5).
While only a very basic comparison, if Pepperstone Razor spreads are 0.16, City Index CFD spreads are 0.73 (see the table) and 1 pip = $10 (standard lots). Then we can surmise the following:
From this example, we can see that a commission account is likely to be cheaper than a spread only account. Both forex brokers offer variable spreads, so both Razor and CFD accounts are likely to vary from the example.
1. Overnight holding costs – You will incur a small charge from each broker for holding an open position overnight. This is an industry-standard.
2. Guaranteed Stop Loss Order (GSLO) –
If you are trading in a high-risk trading environment, then a GSLO can be a solid trading strategy.
3. Currency Conversion Fees – Both brokers charge a fee to convert currency back to the base currency
4. Inactivity Fees –
5. Deposit and Withdrawal Charges / Funding Charges
If you are after the lowest spreads, then we recommend Pepperstone’s Razor account. This is because ECN style spreads are usually narrower than spreads from a market maker.
If you don’t wish to deal with commissions, then we suggest having a look at City Index CFD account.
While the saving of $1.80 using Pepperstone’s Razor account rather than City Index CFD account might not sound like much. The costs will add up, especially if you are using leverage. The higher the leverage, the more capital you have to trade with and therefore the more lots you can trade. You will be saving $1.20 for each lot you trade. This will represent a significant saving over time.
You will need to consider other costs in addition to spreads. For example, Pepperstone does have a deposit charge when using a credit card.
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Both brokers are multi-regulated, meaning the leverage you can trade with is dependent on the subsidiary’s location and local financial regulation of where you are trading. City Index in regulated in Australia, the UK, Singapore and Dubai. While Pepperstone is regulated in Australia, the UK, Cyprus, Germany, Dubai, Kenya, and the Bahamas.
The Australian Securities and Investments Commission (ASIC), the Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySEC), along with other ESMA authorities like BaFin, enforce strict leverage caps that vary between asset classes. If you are trading with an Australian, UK or European branch you’ll be restricted to the following leverage limits:
As well as leverage caps, ASIC, the FCA and CySEC require both brokers to provide you with guaranteed negative balance protection as a retail trader.
If you are a high volume trader in the UK or Europe with an account in excess of €500,000, then you may qualify as a professional trader. As a professional trader, your leverage will be:
Professional traders will not receive guaranteed negative balance protection. Your margin closeout will be 50%.
City Index’s other branch located in Singapore and regulated by the Monetary Authority of Singapore (MAS). MAS enforces even lower leverage caps than Europe and Australia, restricting traders to 20:1 leverage for forex trading. In Dubai, City Index follows FCA regulation and enforces the same leverage caps of 30:1.
On the contrary, Pepperstone offers higher leverage via its other offshore entities. In Dubai (DFSA) retail traders can use leverage up to 50:1, in Kenya (CMA) 400:1 and via the Bahamas (SCB) 500:1.
It is important to understand the risks of trading on margin or leverage. Borrowing from the broker means you are taking on a debt which you will need to pay back to the broker. It is therefore important that you trade responsibly.
Despite the risks, trading on leverage or margin can work in your favour. Forex currency movement doesn’t change very much day to day, so the large capital needed to achieve genuine returns can be achieved with leverage.
Pepperstone offer the highest leverage via its entities in Kenya, the Bahamas, and Dubai. Otherwise, City Index and Pepperstone traders are restricted to leverage of 30:1 or less.
Spread betting by its nature does carry risks however there are strategies you can implement to minimise your risk. Pepperstone and City Index both offer the standard risk management tools such as Stop loss, limit orders and trailing stops and utilise automatic margin call system (for negative balance protection). Both brokers also allow hedging, which means you can hedge your bets.
City Index offers a few more features that Pepperstone does not offer. These include:
If risk management is a consideration when choosing a broker, then City Index offers more and better options when we compare with Pepperstone. Risk management tools are really useful if you are new to trading or trading in a very volatile market, if you have trading experience then you might find the standard risk management tools are adequate.
This is City Index’s browser-based trading platform is known as Web Trader. Released in late 2018, this platform replaces Advantage Web as it uses HTML5 rather than Flash. HTML5 offers faster loading performance while consuming less power. It also more mobile and tablet friendly.
City Index’s Web Trader trading tool offers the following key features
360° Market view
Available as a download on desktop, this is City Index trading platform for advanced users as it offers the most powerful trading features than its other platforms. It is designed specifically for traders with an interest in spread betting. It adds to the features available on Web Trader it also offers the following:
City Index has apps available for Apple and Android mobile and tablet products. The mobile platforms offer the same features as Web Trader but fewer variety features. For example, 60 indicators are available, which is less than Web Trader but still an excellent range.
Both City Index and Pepperstone offer MetaTrader 4 by MetaQuotes. This is one of if not the world’s most popular trading platform. The platform and is built for trading foreign exchange and a range of contracts for difference such as commodities. However, is not the best option if you wish to trade shares.
One of the big benefits of MT4 is that many brokers offer it. This means you can change brokers without needing to learn a new platform.
MT4 stands out as a platform because it allows you to trade with three types of execution modes.
In addition to the choice of execution modes, you can also place different types of order requests.
MT4 offers 2 types of stops
City Index spreads with MT4 are wider and offer less leverage than with Pepperstone MT4. Pepperstone also offers MT4 as a web browser (through Web Trader), City Index doesn’t offer this.
This platform is only available with Pepperstone. MT5 is an improvement on MT4 in that it allows you to trade all CFDs in addition to Forex. MT5 offers the following features:
In the past, we have usually recommended MT4 as our preferred platform. This was because MT5 was initially built to meet American financial regulations of the NFA so did not allow LIFO trading or hedging. MT5 has now been modified and can offer these features through brokers not based in the USA. We now see MT5 as the best platform as it offers everything MT4 can do and more.
Despite this, there are still good reasons to choose MT4. If you only wish to trade forex or certain CFDs, then MT4 is a great resource thanks to its clean interface and ease of use. So will satisfy the needs of most forex traders.
City Index’s’ custom trading platforms are also a great platform. They come with more inbuilt tools than MetaTrader and are an award-winning platform, ADVFN awarded it best spread betting platform in 2017 and UK Forex Award did the same. If you do choose City Index, it does help to understand you do risk being locked into their ecosystem. If you wish to change brokers in the future, it can be difficult to move off a propriety platform.
We feel there is little reason to choose MT4 with City Index given it higher spreads and limited leverage.
Both brokers offer a large range of markets for tradings CFDs.
As a trader with Pepperstone, you can trade the following:
As a trader with City Index, you will be able to trade on the following markets:
Note: Futures are also available for some of these City Index CFDs. Spreads and margins will be higher if you choose to speculate on futures. Futures are great for long-term trading.
If you are looking to trade a wide range of CFD or want the option of futures, then City Index may be a better option than Pepperstone. You will need to compare the CFD you wish to trade with to determine which broker offers you better conditions as it CFDs terms vary for each broker, but certainly City Index gives more options for trade.
The excellent service the Pepperstone customer service team provides was recognised in 2018 by UK Forex Award. Customer support is available during 24/5 via the usual mediums – Live Chat, Phone and email.
Pepperstone offers a wealth of training tools for your trading education. These include:
Pepperstone has a team of in-house analyst providing all the latest Market news, trading opportunities and financial events you will want to know when trading.
Pepperstone allows you 30 demo access to a demo platform for any of MT4, MT5 and cTrader. This 30-day restriction can be removed with a request to Pepperstone support. Pepperstone will provide you with $50k in virtual funds.
Customer Service with City Index is available throughout the working week (24/5). The City Index team provides helpful and timely support for all sorts of questions you may have when it comes to trading with City Index. Support is available through Live Chat, Email and Phone.
City Index provides a FAQ section broken by topic which features answers to a range of commonly asked questions. This is likely to be your first stop when it comes to your support needs.
Research and Education:
City Index provides a wealth of free resources that will improve your trading ability and confidence. Features include:
City Index has 2 free demo accounts programs for you to test your trading skills on. Each is the same except one is for City Index CFD and the other is for MT4. With the demo accounts, you will get the following:
If you choose the CFD platform, you will gain access to 4,500 markets. MT4 is mainly FX and selected CFDs. Once the 12 week period is over, you will lose access to the demo platform and will need to apply for a fresh demo account. This means you will lose access to the data you already have.
Both City Index and Pepperstone offer excellent customer service so you can be confident you will get the needed support with either broker. We found City Index’s support tools to be more in depth than Pepperstones however Pepperstone does offer a better demo arrangement given the higher access to funds and possible unlimited access.
If you are part of the Pepperstone Active Trader program and you meet minimum trade volumes per month, you will be rewarded with a cash rebate. This will be deposited into your account daily.
Pepperstone also has a refer a friend program. If you refer someone and this person signs up with Pepperstone and deposits at least US$1000 into their account and makes at least five trades with standard lots, then you will be rewarded with USD100.
A cash rebate program is on offer with City Index. The more you trade each month, the more City Index will reward you. The amount City Index rebate will vary according to the asset class trade. This rebate can be withdrawn as cash once deposited in your bank account each month.
Both brokers are regulated by various bodies in different countries. Having regulation means that the broker will conduct their business in a fair, ethical way and operated in a way that meets the strict compliance requirements set by the regulator.
Regulators require the broker to take measures that will protect your funds. These measures include:
Pepperstone is regulated by:
City Index is regulated by:
If you are in Europe or the UK, you will fall under FCA regulation rules. One benefit of FCA regulation is that retails traders will receive guaranteed Negative Balance Protection. Unfortunately, due to recent changes to FCA regulation, UK retail traders are no longer able to trade cryptocurrency products.
If you are a City Index client from Singapore, then City Index will be compliant with MAS regulations.
Justin Grossbard has been investing for the past 20 years and writing for the past 10. He co-founded Compare Forex Brokers in 2014 after working with the foreign exchange trading industry for several years. He also founded a number of FinTech and digital startups including Innovate Online and SMS Comparison. Justin holds a Masters Degree and an Honours in Commerce from Monash University. He and his wife Paula live in Melbourne, Australia with his son and Siberian cat. In his spare time, he watches Australian Rules Football and invests on global markets.