Electronic Communication Network (ECN) brokers accumulate orders and prices from banks and the market which allows the trader to trade directly with other participants in the market rather than the broker or a Straight Through Processing (STP) liquidity provider.
Check our list of Electronic Communication Network (ECN) brokers here
What does Electronic Communication Network (ECN) mean?
It means that the broker gives you direct market access (DMA) and you can see liquidity and chose with whom to transact directly in the market.
What are the advantages of using Electronic Communication Network (ECN) brokers?
Direct market access (DMA) means that you trade directly with liquidity providers and avoid the Straight Through Processing (STP) and Market Maker (MM) where the broker decides where to execute for you.
It means more integrity and no conflict of interest.
What are the disadvantages of Electronic Communication Network (ECN) brokers?
High entry requirements in terms of capital. Most brokers ask for at least 10-15k USD.
You are subject to market conditions – this means you need to understand liquidity and the order ladder. If liquidity dries up, you may experience price gaps or may not be able to execute orders.
Many brokers claim to be Electronic Communication Network (ECN) brokers and technically speaking in terms of technology they are. However the fact is that a big amount of them list themselves as a liquidity provider and you still end up being matched with them. Thus make sure to find True ECN brokers, rather than ones which just claim to be but actually aren’t.