ECN stands for electronic communications network.
The ECN model was born to facilitate high volume, off exchange, anonymous trading, across a range of asset classes.
|The Institutional Definition:||The Retail Brokers/Traders Definition:|
|A central limit order book (CLOB) trading ‘venue’ where you can trade as maker (join the order book using limit orders) or taker (pay the spread and take the price on offer).||Multi-bank liquidity aggregated into a best bid best offer (BBBO) that is streamed to clients for them to execute on.|
|Participants of the ECN are anonymous and can see all available liquidity.||Orders are hedged with liquidity providers and not held internally by the broker|
|The ECN is responsible for matching trades, etc..||STP and NDD execution.|
|Basically an OTC version of an exchange that incorporates external liquidity from banks and non-bank market makers for a more competitive trading environment.||Broker is not making money on the traders' losses.|
|Institutional ECN examples: HotSpot FX, FXALL, EBS and FastMatch.||Broker does not run a B-book.|
We trade with, and not against you. But what does this even mean?
|CapitalFX ECN||Market maker or ‘ECN Pricing’|
|No conflict of interest between you making money and broker profitability?|
|Wants clients to trade profitably?|
|Does not make money from your losses?|
|Does not make hedge execution decisions based on client trading behaviour or account profitability?|
|Does not benefit from wider spreads causing stop out of retail traders.|
|Does not benefit from interbank stop hunting.|
The CapitalFX ECN account is for traders who want to set themselves up to win. The features and trading conditions are world class and have been designed for your success.
|A broker who is ‘STP’ is a back-to-back broker, i.e. orders are hedged with trading counterparties on a back-to-back and 1:1 basis.||‘No Deal Desk’ refers to there being no intervention, dealer or otherwise, in the transfer of risk from a trader to a maker (liquidity provider).|
|‘Straight Through Process’ refers to the round trip process through which an order is executed between taker (trader) and maker (liquidity provider).||This means trading is fully automated, no human discretionary traders are involved, and hedge execution decisions are not made or based on client trading behaviour or account profitability, i.e. all trades go down a single pipe, through a single order management system, to a single book.|
While this information doesn’t form part of our client agreement, this is information that we expect to be held to account to, and which we are always happy to verify, as all brokers should.