What Is ECN Execution?
- ECN enables trading of financial products outside traditional exchanges
- ECN facilitates trading outside regular trading hours
- Investors from different regions are given access to trading with ECN execution
- ECN gives traders direct access to the financial markets
Understanding ECN Execution – How Does It Work?
Forex ECN explained: ECN connects individual investors and brokers directly without any third-party involvement.
ECN, short for Electronic Communication Network, is a computer-based system that displays the best available bid and ask quotes from all market participants. This system automatically matches and executes orders. Thanks to ECN market execution, investors are able to trade even after the market closes.
Understanding ECN brokers and the way they work is not that hard. ECN Forex brokers offer traders direct access to the financial markets. Although ECN brokers charge traders commissions, the spreads tend to be narrower when compared to conventional Forex brokers.
In most cases, ECN brokers are non-dealing desk brokers, thus, orders are not passed to the market makers. Instead, investors are matched in a trade electronically and the orders are passed to the liquidity providers directly.
Electronic Communication Network Execution in Forex trading gives investors in different regions the ability to quickly trade with each other. The main idea behind ECN is to get rid of the role of the third party in executing orders. It is also known for providing traders a high level of privacy which is considered a huge advantage of ECN trading.
After market participants enter their orders into the system, ECN automatically publishes them. After this, ECN automatically executes these orders and matches buy and sell orders at the best available price.
While understanding ECN execution, it is very important to know the differences between this and other types of execution. In general, depending on the order execution, there are several types of brokers in the market. For example, there are Straight Through Processing brokers, which have a lot of similarities with ECN brokers.
Both STP and ECN operate as NDD, No Dealing Desk, meaning that orders are directly forwarded without being processed by the dealing desk. The major difference between these two is that STP orders are forwarded to the liquidity providers directly, while ECN trades form inner liquidity between the members of the system.
What Did We Learn From This ECN Forex Execution Article?
ECN Forex execution is one of many other types of executions. Unlike others, it offers traders direct access to the financial markets.
ECN brokers are non-dealing desk brokers, which means that orders are passed directly to the liquidity providers, without having to go through the dealing desk.
While using ECN best execution, investors are able to trade outside the traditional trading hours, which makes it very flexible.
ECN is a computer-based system and it displays the best bid and ask prices from all market participants.
Detailed Info On ECN Market Execution
What Is The Meaning Of ECN?
ECN stands for the electronic communication network. Electronic communication network execution explained simply is a digital system that matches market participants in the financial markets. It allows investors in different parts of the world to trade without any involvement of the third party, creating a high level of privacy for investors.
How Does ECN Trading Work?
ECN works in a very simple way. Liquidity providers, such as global banks or brokers, enter either buy or sell orders in the server. Then, these quotes are made available for traders. Traders, on the other hand, have access to the different quotes and are provided with the best bid and ask prices available in the market. There is no traditional third party involved in this process.
What Is ECN Account Type?
ECN account is known for offering traders the best possible trading conditions available in the market. ECN accounts, in most cases, are known for charging tighter spreads and offer high speed of order execution. ECN trading offers traders direct access to the financial market, which makes it very popular among traders.