ECN (Electronic Communication Network)
An electronic system that matches buy and sell orders directly between participants instead of routing them through a dealing desk.
An ECN (Electronic Communication Network) is a computerised system that matches buy and sell orders from banks, funds, brokers, and individual traders. Instead of a broker taking the other side of your trade, the ECN pools prices from multiple sources and fills your order against another participant. You get variable spreads and pay a commission per trade.
How It Works
- Pools prices from multiple liquidity providers (banks, funds, other brokers)
- Shows the best available bid and ask as a live order book
- Orders are matched electronically with no dealing desk involved
- Spreads are variable and can drop to near-zero when liquidity is high
- The broker charges a commission per trade rather than marking up the spread
Types of ECN (Electronic Communication Network)
ECN Broker
Routes orders to liquidity providers. You see raw spreads and pay commission.
STP Broker
Straight-Through Processing. Similar to ECN but may not show full order book depth.
Market Maker
Takes the other side of your trade. Fixed spreads, no commission, but potential conflicts of interest.
Trading Tips
Scalpers and high-frequency traders tend to prefer ECN for the tighter spreads
Always compare total cost: tight spread + commission can still beat a wider zero-commission spread
ECN accounts usually need a higher minimum deposit than standard accounts
Spreads widen during news events and low-volume hours, so there is no fixed guarantee
Many brokers call themselves ECN when they are not. Ask about their liquidity providers
Related Terms
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