It is a computerized trading network used by different financial institution, bank or individual traders whose only goal is to execute the transaction of currency directly without the middleman. An individual’s traders with a small amount of capitals are open to access in the foreign exchange market. In ECN system any individuals can set up his own selling and buying price on the basis of his own interest or on the behalf of his client. There is a database server through which all the trading individuals trades or places their order, the system find the owner with matched primitives such as currency pair, number of lots and price etc. After that the transition executes automatically.
A popular trading system
In today’s world The ECN system has gain much more popularity in currency trading among an individual’s traders because either we buy or sell, for any bid entry in the system gives best execution. With ECN system any individual can take part in global currency trading among major financial institution because this system allows them to communicate with other forex market player. Now the question could be “who participates in ECN”, so the answer is there are number of listed forum and institution which take part in the forex through this system.
Which kind of companies are affected by forex
They are commercial banks which counts lots of commercial value in the form. Central banks are also aggressively investing their currency in order to regulate their currency overseas. Through this system brokerage companies make a straight path between their clients to participants in the foreign market Import and export companies, where profits affected by foreign currency exchange rate, they also invest in this market. An individual’s traders whose are waiting to take advantage of exchange rate fluctuation on global currency exchange rate? In order to have a direct access trading, one must have a subscription or have an account with a broker, called as ECN account. ECN subscriber or individual trader can place their order via ECN, network protocol. Then ECN will check for a match after founding the match it execute the process automatically. There is also a facility to show the unlatch order to other subscribers to view.
Some ECN brokers provide addition features to the subscriber, for example, negotiation, securing and can give authentication to the entire book which gives real time market. Electronic auction type of negotiation is most common because since 2005, price negotiation is supported by most e- business system .There is an automated negotiation, useful in interacting with complex system composed of autonomous agent. Well, in negotiation each and every offer is totally focused on its own usefulness. In New-York, the first and online trading was started by Matchbook FX in 1998-1999. At that time all the amount were generated and supplied to FX’s traders and users of Matchbook, including banks and retail traders etc in its network. This concept was incredible during that era but after that multiple FX ECNs has been created and are being supplied the streaming quotes from their top bank of the world.