How it works
On an ECN, your order joins an order book where banks, hedge funds, and other clients are quoting prices. The best bid and best ask define the spread, often razor-thin. You pay a small commission for the routing. The broker has no position in your trade. On a market maker venue, the broker quotes the prices directly. The spread is wider, no separate commission. The broker is your counterparty: when you win, they lose, and vice versa.
Example
EUR/USD on an ECN: spread 0.2 pip, commission $7 per round-turn lot. Total cost on a standard lot is 0.2 pip ($2) + $7 = $9. EUR/USD at a market maker: spread 1.4 pip, no commission. Total cost is $14 per standard lot. ECN wins on cost for active traders. The flip is that ECN slippage is real (price moves between click and fill), while market maker fills are stable but at a worse price.
What each is best for
- ECN: scalpers, day traders, anyone whose strategy is cost-sensitive. Requires minimum capital for commission to be worth it (typically $5,000+).
- Market maker: swing or position traders where the wider spread is dwarfed by the move target. Smaller accounts where flat commission would be painful.
Why it matters
The conflict-of-interest problem on market maker venues is real but overstated. Regulated MMs hedge their book in aggregate; they do not personally need your trade to lose. The bigger issue is execution quality: requotes, last-look rejection, and selective slippage that favours the broker. Volity routes Standard accounts to ECN liquidity, which removes the question entirely.
