ECN broker is an expert of forex financial that utilizes ECN (Electronic Communications Networks) as the direct access of his clients to other contributors in the markets of currency. An ECN broker commonly can offer tighter ask spreads or bid to the clients rather than other else that would be available for them. It is because the broker combines price references from some contributors in the market.
More About ECN Broker
ECN Broker cannot trade alongside the client because he only ties trades among market contributors. A charge frequently directed alongside several dishonest forex broker retails. The brokers of electronic communication networks charge the clients in fix commission in every transaction because ECN spreads are so slighter than common brokers used.
What is ECN?
Before you learn more about ECN broker and brokerage, you may also need to know about the ECN (electronic communication network) firstly. It is important to know about the definition, the work, the function, and many more. There are some types of well-known ECNs. It is important to know about them so you can learn about it much further. Some explanation about the definition and more information about ECN below may help.
ECN is an automatic system that control the securities of buy and sell orders. It connects individual traders and major brokerages so they can make trading transactions between them, but ECN is not the middleman. Every transaction will be charged in a fee by ECN. With its assistance, investors from distinct areas in the world are possible to trade each other in fast and easy way. As broker dealers, ECNs are required by Exchange Commission and Securities to register.
More About ECN
An ECN tries to remove the role of third party in performing orders made by market makers of exchange or over the counter, and then ECN permits the orders to perform partly or entirely. The placed orders via ECN are commonly limit orders.
The best bid offered is displayed by ECNs and then they ask quotes from numbers of market contributors, then match and preform the orders automatically. During market hours, they enable trading on major exchanges, foreign currency trading, and after hours trading in the same time. They let speedy execution, automated trading and passive order matching. Some types of ECN work for institutional investors servicing and some others for retail investors servicing.
Also read: Forex promotions by brokers
There are some kinds of ECNs such as Instinet, NYSE Arca and SelectNet. The firstly established ECN is Instinet in 1969, for small brokerages and made for institutions transactions. It is mostly used by Nasdaq trades market makers, yet it can also be used by small companies and individuals. Meanwhile, SelectNet is an ECN that is majorly for market makers that need instant order execution and assists the investors to trade with certain market makers. Meanwhile, the NYSE Arca was established in early 1996, it was the merge of Archipelago and New York Stock Exchange. It enables major US exchanges electronic stock trading such as Nasdaq and NYSE.