Forex glossary
ECN broker
An ECN electronically matches buying and selling interest. The label ECN broker describes a claimed access or execution arrangement, not necessarily the legal counterparty to a CFD. Check execution policy, fees and whether the provider acts as agent or principal.
Illustrative example
How does it work in practice?
In a hypothetical model, a client opens a 10,000 EUR CFD and the provider simultaneously hedges it on an external network. These are two contracts; the client does not automatically join the bank transaction.
A case to work through
Two hypothetical tariffs
Model: pip value is fixed at 1 USD; A charges a 0.2-pip spread plus 2 USD round-trip commission, B a 1.5-pip spread with no commission.
- A costs 0.20 + 2 = 2.20 USD.
- B costs 1.50 USD; the smaller spread did not produce the smaller total.
What follows? Compare components at the same quantity and fee scope.
Example boundary: These tariffs are hypothetical and exclude swap and slippage.
A useful distinction
ECN broker / spread (bid-ask spread)
Spread is the bid–ask difference; ECN describes a network or claimed access method.
Check your understanding
Compare the full entry-and-exit cost.
Show the answer and explanation
B: 1.50 USD
A costs 2.20 USD after commission.
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Related terms
Sources and documentation
- FCA — CP16/40, Chapter 2: CFD provider business models
Historical consultation, sections 2.2 and 2.9: the CFD counterparty and external hedging are separate matters. This is not evidence of current leverage limits.
Document read: - SEC: Rule 606 frequently asked questions
US securities orders: routing relationships and payment disclosures, not FX CFD rules.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.