ECN stands for Electronic Communication Network. It is an automated system that matches buy and sell orders for securities. It allows any trader connected to the ECN to enter an order for a security in the hope that it will be executed according to their pre-entered parameters. The FP markets ECN is a network that brings together foreign exchange liquidity providers in order to deliver an FX price feed to our retail and institutional FX clients. This is facilitated through an instantaneous price auction for the best bid and offer on each FX pair amongst the connected providers. The client order will be matched with the best price.
ECN’s have a number of benefits. They are associated with increased pricing transparency, lower or narrower price spreads and increased speed of execution. An ECN’s aim is to use the aggregated price feeds to provide sufficient volume at the quoted price level so that order flows are filled efficiently and without slippage and so that the price feed remains stable. The rise of ECN networks has lead to increase competition among liquidity providers and market participants and lead to a lowering of transaction costs. It has also allowed trading outside of times usually offered by fixed, geographic based exchanges, such as a stock exchange.