The 12 Most Misunderstood Facts About ECN Brokers

The ECN broker's field is relatively new with little competition, using trading technology similar to that of futures markets. Only now it is enjoying popularity due to the increase in the number of clients. Within the next lines, we debunk some misconceptions and reveal interesting facts about the ECN brokers. Let’s get started!

1. What ECN stands for?

ECN stands for "Electronic Communication Network". It is a process that grants direct access to market players in particular small traders, banks, investment funds and individuals to higher tier liquidity providers. By creating this direct link, clients can have an efficient trading process that mitigates risk and maximizes profit opportunities. And because ECN technology eliminates the middleman and dealers, customers have faster and ultimately cheaper trades.

2. Spreads

In fact, with ECN brokers, clients benefit from trade executions with tight spreads. That means that there are no limits or stop levels and traders can freely trade within the spread.

3. Trade executions

ECM technology was created to make carrying out online trades easy and seamless. Therefore, thanks to the ECN system, clients can live stream, set orders and receive immediate confirmation.

4. Direct access to liquidity providers

Clients benefit from direct access to superior liquidity providers such as world-class banks and prestigious financial executions. It means that they can trade on global liquidity.

5. Trading strategies

With ECN technology, traders can use any trading strategy they want, even scalping. There is no restriction for this.

6. Automated trades

It's a system that instantly searches for and matches orders in real-time. Orders are executed automatically; this guarantees a fast-trading experience and optimizes the broker's working time.

7. ECN technology

ECN technology allows clients to take advantage of tight spreads, low commissions and efficient executions. The system instantly searches and matches orders in real-time. It automatically executes the commands that match traders’ conditions. That ensures a fast and optimal trading experience.

8. Choosing an ECN broker

To start trading online, the first step is to choose a broker and register with them. Prior to proceeding with the various formalities, it is essential to know the different kinds of existing platforms, keeping in mind that each operator can adopt a specific business model.

9. Real-time order books

With an ECN broker, the order book shows up in real-time. In that way, the market is transparent, and all players benefit from all the information essential for their operations. The broker's compensations are usually performed based on the volume traded and commissions.

10. Supply and demand

For a market to work, buyers and sellers come together in the market. It brings together traders, market makers, and banking institutions. The ECN broker makes sure that orders from the clients are matched. In case they are not, the broker requests a liquidity provider.

11. No dealing desk broker

In fact, banks offer the possibility for clients of an ECN broker to profit from attractive spreads and good liquidity. However, it should be noted that these spreads can soar when the trend is highly volatile (after the revelation of major economic news, for example).

12. Not only for institutions and professionals

Formerly, the ECN broker was exclusively for professionals and prominent financial institutions. Today, individuals can also take advantage of their services. These can even get cash from this operator. Here, the participants' advantage lies in the fact that a broker of this type is never against the client, his mission is to ensure the orders at the interbank market level.

Customers can also carry out a transaction by placing themselves in a price range (between requested and offered price). Moreover, it's one of the specific characteristics of an ECN broker. In all cases, it is quite possible to maintain anonymity by placing orders.