ECN is a trading technology, which allows price makers to provide an executable price stream (including buying price and selling price) to the market and establish a virtual order book similar to the stock market. Pricing is also a participant in ECN model, which provides liquidity for buying and selling.
Through the virtual order book established by price makers composed of major first-line banks, this model is completed through close cooperation with banks, institutions, foreign exchange markets and technology suppliers. Traders' orders are directly and anonymously hung on this network, and each order is in the same location, and the transaction is carried out according to the optimization of price and time.
Characteristics of ECN
ECN traders act as intermediaries between traders and markets. All transactions are directly connected to ECN, and the quotation in ECN is provided by the liquidity provider of ECN traders. Many liquidity providers should avoid conflicts of interest among ECN traders, customers and liquidity providers.
ECN model allows customers to conduct on-site transactions at the level of banking institutions, such as the world's leading investment banks, hedge funds and liquidity pools. The diversified liquidity portfolio provided by different banking institutions means that ECN dealers can provide customers with high liquidity and keep the spread at a low level, especially in the period of rapid market movement, such as the release of important news.