The Role of ECN Brokers

If you’re a forex trader, you may want to try out the ECN forex system. To do so, you have to first select an ECN broker. An ECN broker is the one who matches your orders with that of the others. You and the other clients like investment houses, hedge funds, big financial institutions, big banks, and other individual forex traders are grouped as Tier-1 liquidity providers and form an interbank forex market.

As a forex market, it provides the best rates but high volume transactions such that an individual trader like you may not be able to afford.

If you want to get the best rates, the interbank forex market is your best bet. Unfortunately, you need a credit line to be able to trade in this forex market. Thus, you need the services of an ECN broker as he will act as a bridge between you and the other Tier-1 liquidity providers. Through a protocol technology, the ECN broker is able to match your orders with the others. This means that you now have access to the best forex rates and that you deal directly with the other Tier-1 liquidity providers through your ECN broker.

What Is An Electronic Communication Network?

The Electronic communication network or ECN is your link to the forex market. It is actually software which is able to match your orders with the others in order to make a forex transaction. If you send your order, the ECN receives it and tries to match it with the other orders of the same quantity. If there is currently no matched order, it will be posted so that it can find its match later on.

If you trade through ECN, you must realize that you’re not trading with the network nor are you transacting with a single entity. In fact, you’ll never know who matches your order as the network is too large and there are so many liquidity providers. Also, the liquidity providers don’t know from whom the order came from.