ECN Definition

ECN stands for Electronic Communication Network. It is an electronic system that automatically matches the opposing orders of Forex market participants, both consumers and providers of liquidity. ECN network gives access to the real markets, where every trader can benefit from the available liquidity.

ECN network is normally associated with non-dealing desk services, eliminating the need for an intermediary in the order execution process. Forex agents display their own orders, and transact directly with each other in the interbank market.

Brokers that provide a marketplace for ECN trading are called ECN brokers. The most appropriate marketplace requires a selection of favorable terms and conditions, such as narrow spreads, low-latency execution, an absence of re-quotes, a variety of financial instruments, and a chance to apply various trading strategies. Traders pay a fee to a broker for trading in the ECN environment. 

The first ECN network appeared in 1969, and was called Instinet. Later, it merged with another popular ECN Island, and grew into Inet. There were a few other ECNs competing for leadership in the industry, for example, Archipelago and Brut. However, they were integrated into the NASDAQ and NYSE stock exchanges. At present, there are a number of brokerage companies offering ECN finance technology to the Forex market.