Introducing the ECN
How Electronic Communications Network (ECN) broker
There's been a quiet revolution in the world of trading over the past six to seven years. If you're a relatively
new entrant to the market it may have passed you by, you'll have simply accepted it as the norm. But for those of
us who've been involved in the industry for over two decades, observing the recent evolution of our industry, to
become the phenomena we now recognise, has been nothing short of miraculous.
The platforms, the spreads, the ease of doing business have improved significantly. However, the quantum leap
(in all aspects of trading efficiency), came with the introduction of the STP/ECN trading model. This method of
Forex trading is now recognized as the accepted standard of excellence, by which all
Forex brokers should be judged. (An STP broker is a Straight Through Processing broker, sometime known as
Market Making broker.)
|Electronic Communications Network or ECN broker gives you a direct access to
displaying your order
in the market, but it's usually available only to the large forex traders.
How STP/ECN trading model works
Your orders are routed to market, with no interference by way of dealing desks, into a liquidity pool of
competing investment banks and large institutions. These are constituents who are looking to bid for your order, on
your terms and at the lowest possible costs, at any time in the market, it's the perfect mechanism by which to
trade. The "honest brokers" who offer this facility should be the only destination you consider, when opening an
forex trading account. But there's another unforeseen consequence of only trading with an STP/ECN forex broker which is often overlooked by traders; they need you to
Not only will your reputable broker provide you with an account, a choice of platforms on which to trade,
excellent spreads, tutorials, webinars, Forex schools, articles and much more, they're also willing, able and would
welcome your communication, via whatever methods you prefer. Even that old fashioned method of communication, by
making a phone call, would be welcomed by all reputable brokers.
STP/ECN trading model
There's possibly a reason why so many clients are reluctant to talk to their brokers, it isn't just a normal
shyness, or the natural tendency towards introversion which many retail traders display. Prior to the introduction
of the STP/ECN trading model many traders had a natural and arguably justified, distrust and suspicion of
brokers. They were regarded as the necessary evil, no more than the
route to market, a service that would ultimately profit from your losses. They weren't interested in your
success, as in a relatively closed market with little competition, they could set their own terms of doing
business, and if you didn't like it the alternatives weren't much better.
With the new STP/ECN model brokers need you to succeed, they survive and thrive only on the volume of trades you
place. If you're not successful and that success needs to happen in as short a period of time as possible, then
it's highly probable that you won't enjoy your initial baptism into the Forex industry. If you don't enjoy your initial experience, then you'll probably give up
trading very quickly.
With this in mind the new broker mindset, the only mindset many brokers identify with, has been deliberately
created with clients' continued success at the heart of the broker proposition who'll be delighted to converse with
you. They can't trade for you, they can't advise on which trades to take. Under various financial, governance
regulations, they can't opine on where they think a currency pair may be headed, but they can (and will) offer up
every other support method as part of the small cost of the spread you pay. It's good to talk, why not open up that
line of communication next time you have a query?