ECN Forex
Is there a better way to trade the forex markets? Well Yes there is and it goes by the name of ECN forex.
One of the biggest trends in the world of currency exchange has been toward an ECN forex environment or Electronic Communication Network. Loosely defined, an ECN forex broker is a bridge between traders (Yourself) and price providers (Banks, Institutions). The forex banks provide prices for the various currency pairs and traders transact these prices.
An ECN forex broker is really the definition of what a broker should be doing. Acting as a middle man between a set of buyers (or sellers) and a set of sellers (or buyers). The ECN forex broker gets a fee for the service provided. End of story, done and dusted.
ECN forex brokers typically don’t have dealing desks. There really is no need in a true ECN environment. Acting solely as a middle man means an ECN forex broker doesn’t have any risk to offset or hedge. Once the deal between seller and buyer has been made, the ECN’s job is done.
Unlike ECN forex, traditional forex brokers work on a dealing-desk model. Apart from providing prices for their traders to transact on, dealing-desk brokers are actively trading the same transactions as their clients. Enter a trade with anything other than an ECN forex broker and the odds are your broker is the counter-party to the deal. Forex trading is a net game. The pot is always the same so for somebody to make a profit, somebody has to lose money. Your friendly dealing-desk broker is in the hand with you, so for him to make a profit, you have to lose.
ECN forex brokers have no dealing-desks, so they are never in the hand with you. There is no conflict of interest and certainly no need to manipulate prices against a trader. The fee at the end of the trade is the same for an ECN forex broker whatever the outcome of the trade.
ECN forex is, by design, a much more transparent way to trade currencies. The absence of a dealing-desk takes away all the “background” stuff that might be going on in a traditional broker environment. The dreaded re-quote is one of those things you won’t get on an ECN. There’s no need for them.
Paradoxically, ECN forex is transparent but at the same time, anonymous. Whenever you place a trade in an ECN forex environment, the counter-party to the trade is the price provider. These providers however don’t see trades from individual traders. They see trades originating from within the FXCC system. While your dealings with FXCC are transparent, your trades remain anonymous. Pretty much the best of both worlds.
ECN forex has one more ingredient that acts in your favour. Variable spreads. The currency markets are highly liquid and highly volatile. Prices for the various currency pairs are constantly changing and the best way to “describe” what the market is doing is with variable spreads. Trading ECN forex variable spreads mean your trades are placed into the market at levels which accurately reflect what the markets are doing.
ECN forex with FXCC brings the world of Interbank style trading to the private investor. We’ve taken out all the background “noise” from the world of currency exchange leaving you free to concentrate on your trades. Just the way it should be.
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