Liquidity and direct access to markets are two of the most crucial aspects of foreign exchange trading. Many “old school” forex brokers are called “dealing desk” brokers. This is to say. They mediate your interactions with liquidity sources like banks, brokers, and other traders. Some investors choose 24-hour direct market access to avoid these middlemen altogether. ECN brokers play a crucial role in this context. An electronic communications network (ECN) is a trading platform that eliminates the need for a broker and provides traders direct access to global stock and currency markets.
If used correctly, ECNs can provide enormous value to traders. Those willing to avoid intermediaries may look into the services provided by a brokerage that includes access to an ECN. If so, you should read our in-depth primer on ECN brokers before making any trades on, Pepperstone mobile app.
As was previously stated, “electronic communications network” (ECN) is an abbreviation. Traders can gain immediate access to the equity markets through these automated, algorithmic networks. A forex trading platform is a network that facilitates transactions between buyers and sellers of foreign exchange (FX).
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Due to the absence of a dealing desk, you can negotiate your terms while buying and selling. You may already be aware that many brokers serve as market makers and, as such, must collect a “spread” from their clients to cover their expenses (i.e., facilitating forex trades). The spread you pay while trading with an ECN broker is lower than with a traditional broker (i.e., the difference between the bid and the asking price of a currency pair).
ECN brokers typically don’t charge a spread. The ECN broadcasts the orders entered by the various market players directly to the traders and other parties involved. An algorithm that compares the asking prices of buyers and sellers can then execute these orders at best possible market price.
Because this network connects large and small traders with liquidity providers, you can participate in the foreign exchange markets, notwithstanding the size of your trading account.