What you need to know about ECN Trading Guide

ECN Trading & Brokers

The purpose of the site ECN execution is to create a space where traders can easily find information to understand what Electronic Communication Network (ECN) Trading is about and providing them the information about the best brokers for ECN Trading.
The Forex trading industry is so large and lucrative, yet traders still do not know the benefits of trading on an Electronic Communication Network with a broker .
We will uncover what ECN Trading is, how is works, the fees involved trading in this type of account and how you and the broker makes money from trading on an Electronic Communication Network.

What is ECN Trading

An (ECN) electronic communication network is an international financial network system that pairs buy and sell orders or trades on the market.
An ECN trade facilitates traders anywhere on the globe to make a secure transaction (trades) without a third party. Primarily forex and stocks are traded on an ECN.

What is Electronic Communication Network

An (ECN) electronic communication network is a digital network system that matches buyers and sellers looking to trade financial assets in the markets.
The 1st Electronic Communication Network was created in the 1969 to lower transaction costs across brokers and provide clients full access to their order books whilst providing order matching outside traditional exchange hours.
This is also referred to as alternative trading networks or systems.

Keynote:

An Electronic Communication Network (ECN) is a financial network system that facilitates the trading of financial assets without a third party. Provided you have an account with a broker that provides direct access trading.

Recommended ECN Brokers

Choosing the correct broker for trading is critical to your trading journey, there are many factors you should take into consideration specifically for ECN trading before settling with the broker you may be trading with or when switching to a new choice broker which is best suited to your needs and factors which are important to you personally.

What makes a ECN Broker?

ECN brokers have accounts that trade as non-dealing desk brokers, they do not share their clients’ orders with market makers. They instead use an automated matching system to pair buyers and sellers and send orders to liquidity providers.
An ECN broker is a middleman who helps investors make transactions on the ECN.

Who is the Best ECN Broker?

There are alot of factors to consider what makes the Best ECN broker
One important factor is to identify if indeed a broker is a true ECN brokers.
ECN brokers offer faster execution of orders and usually at more favorable prices.
An ECN broker facilitates trading for clients over the electronic communication network.
ECN broker also saves money and frees up trading time due to the nature of the ECN setup.
The volume of orders is not routed to market makers by ECN brokers.
Brokers electronically match traders and send orders to middlemen in the securities markets.
ECN broker simply matches transactions between market participants
It is forbidden for the broker to engage in any activity that might cause financial loss to the customer or clients.
As a result of the substantially narrower spreads offered by ECNs, ECN brokers often charge a flat fee for each trade made by their clients.
Traders get different execution quotes and are shown the best bid and ask prices on the market at that time.

How does ECN Trading work

An ECN broker facilitates traders to enter the currency markets through the Electronic Communication Network and matching trades with other traders and passing the orders through to liquidity providers.

Liquidity providers like global banks
Orders to buy or sell are put into an ECN server by liquidity providers like global banks. Then, they give those quotes to their clients so they can trade with them.

Traders get different execution quotes and are shown the best bid and ask prices on the market at that time.

An Example of an ECN Trade

Keynote:

An electronic communication network (ECN) is a digital system that brings together buyers and sellers who want to trade securities on the financial markets.

ECNs let brokerages and investors from different parts of the world trade without a third party. This gives investors privacy.

ECNs allow trading to happen outside of normal trading hours, so investors can react to or plan for news that happens after trading hours.

One bad thing about using ECNs is that they have access fees and commission fees that can make the total cost of use go up.

Without ECNs, matching buyers and sellers would take a lot longer, making it harder to get into or out of positions and increasing the costs and risks of trading.

How does ECN Trading work

src: blog.roboforex.com

ECN Trading accounts vs Other Trading types

What is ECN account type?
An ECN account allows traders to trade on the electronic communication network and pair orders with buyer and sells on the international market.

ECN Trading vs Straight Through Processing (STP)

ECN Trading is more transparent
ECN Trading orders are sent exclusively to the interbank market, while orders placed with an STP broker may be sent to any of the broker’s liquidity providers, including banks and interbank exchanges.
Commissions on transactions are standard with ECN brokers but optional with STP brokers.
Unlike STP brokers, who can offer set spreads whilst ECN brokers’ spreads are always floating.

ECN Trading vs Market Makers (MM)

Market makers set both the bid and the ask prices on their systems hence “maker” the price, whereas with ECN the trade goes to the interbank market as liquidity providers
Market makers provide some liquidity to the market.
Market makers exchange rates are set in their own best interests.
There are 2 types of Market makers retail & institutional.
Market makers are essentially bidding against you (the trader)
Market makers can manipulate the prices
Market makers can freeze, and slippage can occur.

Advantages of Trading with an ECN Account

Tight spreads
Fast trade execution with ZERO requotes.
Great for Scalp Trading
High leverage trading allowed
Great Trading conditions
Charts can’t be manipulated
High liquidity
Trading with Anonymity for large orders
Applicable with many trading strategies

What are the benefits of ECNs?
By using different liquidity providers, an ECN broker can allow prices from these providers to compete in the same auction, which usually means that traders get better prices and cheaper trading conditions.
Moreover, by using an ECN broker, traders usually trade in a more efficient and transparent environment.

ECN Fees by ECN Execution

ECN Fees

What are ECN Fees?
ECN fees are on applied a per-share basis on orders. They are always fractions of a cent, but they can be a little different depending on the brokerage and the exchange.
ECN fees are only charged when a buy or sell order takes liquidity away from the market.

What is an ECN rebate?
ECNs offer traders rebates as an incentive to encourage traders to create a market for the assets they’re trading.

Now you can Start Trading with an
ECN Account

Each broker has its own ECN Fees, which can be a Fixed commission & floating spreads.

Choosing the correct broker for trading is critical to your trading journey, there are many factors you should take into consideration specifically for ECN trading before settling with the broker you may be trading with or when switching to a new choice broker which is best suited to your needs and factors which are important to you personally.
These are the brokers we have reviewed:

ECN Execution Recommended Brokers

IC Markets

Offices:
Australia, Cyprus, Seychelles

IC MARKETS

Minimum Deposit: 200 US dollars
Leverage: 1:500
Products Offered:
Forex, Crypto, Indices, 
Metals, Energies, Stocks
Trading Platform: cTrader, MT4, MT5 
WebTrader, VPS hosting
Regulation: ASIC, CySEC, FSA
Spreads Low
Visit Broker Broker Review