How does an Electronic Communication Network work?

An Electronic Communication Network (ECN) is revolutionizing the world of online trading by providing faster, more efficient, and cost-effective ways to execute trades. In this article, we will explore the characteristics of an ECN, the advantages of using an ECN broker, and the different components of an ECN, including the order matching system, routing protocols, and ECN brokers.
We will look at how an ECN works, from the placement of an order to the delivery of the execution.
By the end of this article, you will have a better understanding of the workings of an ECN, and how ECNs are making trading more efficient and cost-effective.

We will explore the characteristics of an ECN

  • The advantages of using an ECN broker,
  • The different components of an ECN
  • The order-matching system
  • Routing protocols
  • ECN brokers.

What is an ECN?

An Electronic Communication Network (ECN) is a computerized system that enables participants in the financial marketplace to trade securities electronically.
It is essentially a network of banks, brokers, and other market participants that connects buyers and sellers of securities in a decentralized manner over a secure online platform.
It offers an efficient and cost-effective way to trade a variety of financial instruments, including stocks, bonds, ETFs, commodities, and other derivatives.

An ECN broker acts as a facilitator between the buyer and the seller of a security or financial instrument.
When a buyer places an order for a security, the ECN broker will immediately search for the best available price among multiple market makers and liquidity providers.
Once the best price is found, the ECN broker will execute the transaction and the buyer will receive the security at the best possible price.

An ECN allows buyers and sellers to trade within the system without being affected by the presence of other market participants. This enables buyers and sellers to receive real-time access to transparent market information. It also fosters healthy competition among liquidity providers, which leads to better prices for buyers and improved liquidity for sellers.

The use of an ECN has become increasingly popular in recent years as it provides a secure, efficient, and cost-effective platform for the trading of securities. Furthermore, the low transaction costs associated with ECNs make them ideal for traders and investors looking to maximize their returns.

What are the Advantages of ECNs?

The core Benefits of using an ECN are speed, privacy, and transparency.

An Electronic Communication Network (ECN) is a computerized system used by brokers to anonymously and quickly match buyers and sellers of securities. ECNs offer a range of advantages over other order-routing systems, making them an increasingly popular choice for investors.

The first, and perhaps most important, the benefit of an ECN is the speed with which orders can be executed. ECNs are designed to quickly find the best price for security and execute orders almost instantly. This is preferable to other order-routing systems, which may take longer to find the best price and execute the order.

Another major benefit of ECNs is the anonymity they offer to investors. Investors can submit orders through an ECN without having to reveal their identity or the size of their order. This allows investors to act more discreetly, thereby reducing the risk of the market being moved by their order.

In addition to the speed and privacy of ECNs, they also offer a higher level of transparency. Unlike traditional market makers, ECNs display all available orders in their order book. This gives investors an insight into the real-time pricing of securities and helps them make more informed decisions.

Overall, ECNs are becoming an increasingly popular choice for investors due to their speed, privacy, and transparency.

How Does an ECN Work?

An Electronic Communication Network (ECN) is a type of broker that uses a computer system to electronically match buy and sell orders for securities. The ECN broker system allows investors to trade directly with each other, without the need to go through a middleman. This is beneficial as it can reduce trading costs and provide more efficient transactions.

The way an ECN works is that it aggregates orders from a variety of different market participants, such as institutional investors and retail traders. The orders are then routed to the ECN broker’s order-matching engine. This engine then matches the orders and provides an efficient and transparent way for traders to buy and sell securities.

Another benefit of an ECN broker is that it allows for faster execution of trades. Since the ECN broker matches orders, it removes the need for traders to wait for their orders to fill. This can be particularly advantageous in volatile markets where prices are constantly changing.

The ECN broker does have certain risks associated with it. One of these risks is that the liquidity of the market may not be as liquid as other markets. This means that the prices in the ECN market may be more volatile than in other markets.

Additionally, since the ECN broker system is relatively new, there may be a lack of experience in the market and it could be more difficult to find reliable information.

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.

Get access to deep liquidity and the latest trading technology with an ECN broker.
Benefit from competitive spreads, fast execution and advanced order types with ECN. Find the right ECN broker for you today!

Broker

Regulators

Leverage

Spreads

Trading Acc.

Instruments

Connect

FP Markets 

ASIC, CySEC

Up to 1:500*

From 0.0 pips

Broker Type:
STP | ECN | DMA 2 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
Shares, ETFs Crypto, Bonds

Eightcap

ASIC, VFSC

 Up to 1:500 

From 0.0 pips

Broker Type:
STP | ECN
 2 Accounts

Forex, Indices,
Commodities, 
Shares, Crypto

IC Markets

AFSL, ASIC, CySEC, FSA

Up to 1:500

From 0 pips

Broker Type:
ECN
6 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
Shares, Crypto

Axi 

ASIC,FCA, DFSA, FSC

Up to 1:500

From 0 - 0.4 pips

Broker Type:
STP | ECN
 3 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
Shares, Crypto

InstaForex

CySEC, FSC BVI, FSC

Up to 1:1000

From 0 - 7 pips

Broker Type:
MM | Binary
 6 Accounts

Forex, Indices,
Commodities,
Metals, Energies, Shares, Crypto

NordFX

VFSC

Up to 1:1000

Floating spread from 0.9 pips

Broker Type:
STP | ECN
4 Accounts

Forex, Indices,
Commodities, 
Shares, Crypto

FXOpen 

ASIC, FCA

Up to 1:500*

Floating spread from 0 pips

Broker Type:
STP | ECN
 6 Accounts

Forex, Indices,
Commodities, 

Metals, Energies,

Shares, Crypto

Vantagemarkets

CIMA, ASIC, FCA

Up to 1:500*

From 0.4 pips

Broker Type:
STP | ECN
4 Accounts

Forex, Indices,
Commodities, 

Metals, Energies,

Shares, Crypto

RoboForex

IFSC

Up to 1:2000

From 0.0 pips

Broker Type:
MM | STP | ECN
5 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
ETFs, Shares, Crypto

Exness

FCA, CySEC, FSA, CBCS, FSC, FSCA

Up to 1:3000

From 1 pip

Broker Type:
STP | ECN
 6 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
Shares, Crypto

FBS

CySEC, FSC, FSCA, ASIC

Up to 1:3000 

From 1 pip

Broker Type:
STP | ECN
 6 Accounts

Forex, Indices,
Commodities, 
Metals, Energies,
Shares, Crypto

Order Matching System

An Electronic Communication Network (ECN) is an automated system that facilitates the matching of buy and sell orders for financial instruments. ECNs bring together buyers and sellers, allowing them to trade directly. The ECN system is used by many large financial institutions, brokers, and trading firms.

The most common type of ECN is the order matching system, which works by matching buy and sell orders submitted to the ECN. Buy orders are matched with sell orders and vice versa.

The ECN first checks to see which party is offering the best price and then proceeds to match the orders. The ECN also makes sure that the transaction meets all the restrictions set by the financial institutions (e.g., minimum price amount, etc.).

Once the orders are matched, the ECN will send each party the details of the trade, including the amount, price, and details of the securities that were traded. This information can then be used by the parties involved to settle their accounts.

The ECN also plays an important role in providing liquidity to the markets. By connecting buyers and sellers, the ECN helps to ensure that there are always buyers and sellers in the market. This helps to reduce volatility and ensures that prices remain stable.

Routing and Execution Protocols

An Electronic Communication Network (ECN) is an electronic system that matches buy and sell orders with the goal of providing its clients with the best possible execution. To ensure that orders are routed and executed in the most efficient and cost-effective manner, ECNs use routing and execution protocols to regulate market access and order handling.

ECN brokers are responsible for creating the protocols used by the ECN to facilitate order routing and execution. These protocols allow ECNs to connect to exchanges and other sources of liquidity and route orders for execution without manual intervention.
Depending on the type of ECN, an order may be routed to an exchange, another ECN, or even a broker’s own proprietary trading desk.

ECN routing protocols provide a layer of automation that simplifies the process of routing orders. ECN protocols can route orders in different ways depending on the particular protocol they use. For example, one protocol may route orders directly to the best available price, while another may route orders to the lowest price offered on the best available venue.

In addition to routing orders, ECN protocols also provide execution protocols for order filling. Generally speaking, execution protocols specify how and when an order is filled and the conditions that must be met for it to be filled. For example, an execution protocol may specify that an order must be filled within a certain time frame or at a certain price.

Finally, ECN protocols also provide for order cancellation or modification. This allows traders to quickly modify or cancel orders that are no longer desirable. The ability to quickly cancel or modify orders is important in active markets, where prices can move rapidly and unexpectedly.

ECN Brokers

An Electronic Communication Network (ECN) broker is a special type of broker that has access to the ECN, which is a network of banks and financial institutions that enable direct trading between participants. ECNs enable traders to have direct access to the market and to competitively bids and offer prices.

ECN brokers facilitate trading on the ECN by providing access to the network, allowing traders to access the latest market prices and to enjoy low latency execution of their orders.

The main benefit of using an ECN broker is that they provide a faster and more reliable trading environment as orders can be placed directly on the ECN.

This ensures that traders can take advantage of the best prices available at any given time and can also reduce the risk of slippage, which occurs when orders are executed at a different price than expected.
By having direct access to the ECN, the risk of slippage is greatly reduced, resulting in better trading performance.

In addition, ECN brokers make use of advanced technology that allows traders to access market prices from multiple sources, often including dark pools, which are private exchanges used by large traders that bypass the regular market.

This technology also allows traders to access real-time market data, which can be used to analyze market activity and trends. All of these features make ECN brokers an ideal choice for traders who want to access the latest market prices and trade quickly and reliably.

Now you can Start Trading with an ECN Broker

When compared to other types of brokers, an ECN broker can be very helpful for anyone who wants to start trading foreign exchange.
If you are new to the foreign exchange market, you should do some research to find an ECN broker that offers services that meet your needs and are backed by a good reputation.
Even though there are a lot of brokers in the business, ECN brokers may be the best choice for your overall trading needs because of the benefits they offer.

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

Exness

Since 2008

Offices:

UK, Cyprus, Seychelles

Exness

Minimum Deposit:Standard; Cent; Plus: $1 | Raw Spread, Zero, Pro:$200
Account currency:USD
Leverage:From 1:100 up to 1:2000
Accounts:Standard, Standard Cent, Standard Plus, Raw Spread, Zero, Pro
Instruments Offered:Forex, Indices, Metals, Energies, Shares, Cryptocurrencies
Trading Platform:MT4, MT5, WebTrader, Mobile, Free VPS hosting
Regulation:FCA, CySEC, FSA, CBCS, FSC,  FSCA
Spreads:Standard; Cent: from 0.3 pips,
Standard Plus: from 1 pip
Pro: from 0.1 pips,
Raw spread; Zero: from 0 pips,
Visit BrokerBroker Review

AXI

Since: 2007

Offices:

UK, Australia, UAE, Saint Vincent & the Grenadines

 AXI

Minimum Deposit:$1
Account currency:AUD, CAD, CHF, EUR, GBP, HKD, JPY, NZD, SGD, USD
Leverage:Up to 1:500
Accounts:Standard, Pro, Elite
Instruments Offered:Forex, Indices, Commodities, Metals, Energies, Shares, Cryptocurrencies
Trading Platform: MT4, PsyQuation with Axi,  WebTrader, VPS hosting
Regulation:ASIC,FCA, DFSA, FSC
SpreadsStandard: from 0.4 pip, Pro: from 0 pip
Visit BrokerBroker Review

InstaForex

Since: 2007

Offices:

Cyprus, St.Vincent & the Grenadines, British Virgin Isles

InstaForex

Minimum Deposit:From $1
Account currency:EUR, USD
Leverage:From 1:1 up to 1:1000
Accounts:Demo, Insta.Standard, Insta.Eurica, Cent.Standard, Cent.Eurica, PAMM
Instruments Offered:
Forex, Indices, Futures, Options, Commodities, Metals, Energies, Shares, Cryptocurrencies
Trading Platform:МТ4, МТ5, InstaTrader, WebTrader, Multiterminal, Mobile Trading, VPS hosting
Regulation:CySEC, FSC BVI, FSC
Spreads:0 pips: Insta.Eurica and Cent.Eurica;
3–7 pips: Insta.Standard and Cent.Standard
Visit BrokerBroker Review

EightCap

Since: 2009

Offices:

Australia, Vanuatu

EIGHTCAP

Minimum Deposit:$100
Account currency:AUD, USD, GBP, NZD, SGD, EUR
Leverage:1:30 for Australian clients
1:500 for Non-AU clients
Accounts:Standard Account, Raw Account
Instruments Offered:
Forex, Indices, Commodities, Metals, Energies, Shares, Cryptocurrencies
Trading Platform:MT4, MT5, Mobile, VPS hosting
Regulation:ASIC, VFSC
Spreads:From 0.0 pips
Visit BrokerBroker Review

IC Markets

Since: 2007

Offices:

Australia, Cyprus, Seychelles

IC MARKETS

Minimum Deposit:200 US dollars
Account currency:USD, AUD, GBP, CHF, JPY, NZD, SGD, CAD, HKD, BTC
Leverage:From 1:1 to 1:500
Accounts:Demo, Raw Spread, cTrader, Standard, Islamic, PAMM
Instruments Offered:Forex, Indices, Commodities, Metals, Energies, Shares, Bonds Cryptocurrencies
Trading Platform:cTrader, MT4, MT5, WebTrader, VPS hosting
Regulation:AFSL, ASIC, CySEC, FSA
SpreadsFrom 0
Visit BrokerBroker Review

FBS

Since: 2009

Offices:

Cyprus, Belize

FBS

Minimum Deposit:$1 , €10
Account currency:Euro
Leverage:1:3000 
Accounts:Standard Account, Cent Account, Demo Standard Account, Demo Cent
Instruments Offered:Forex, Indices, Commodities, Metals, Energies, Shares, Cryptocurrencies
Trading Platform:MT4, MT5, Multiterminal, WebTrader, FBS Trader, VPS hosting
Regulation:CySEC, FSC, FSCA, ASIC
Spreads:From 1 pip
Visit BrokerBroker Review

Conclusion

In conclusion, Electronic Communication Networks (ECN) offer a vast array of benefits to traders, including lower transaction costs and faster execution times.

While direct access to ECN markets can come with certain disadvantages, such as the need for specialized knowledge, the benefits of ECN trading far outweigh any drawbacks.
ECN brokers offer a valuable service that can provide traders with access to lucrative markets, allowing them to trade more confidently and efficiently. ECN trading can be a rewarding experience, and it is a viable option for both new and experienced traders.