Each ECN system’s participant can set up his own buying or selling price based on his own interests or on behalf of his clients. All trading orders are entered into a database. The system finds orders with matching parameters such as currency pair, number of lots, and price. Then the transactions are executed automatically.
ECN trading has gained popularity among traders as there is always a buyer and a seller for any bid entering the system, which allows best execution.
With the ECN technology, individual traders can interact with other financial market players and participate in global currency trading alongside major institutions.
The main ECN participants are as follows:
Commercial banks that make the bulk of trading operations in the financial market.
Central banks that oversee currency regulations in their countries.
ECN brokers that provide opportunities for their clients to participate in the financial market.
Import/Export corporations that are engaged in importing/exporting activities with profits affected by foreign currency exchange rates.
Investment funds that invest clients’ assets and perform trading operations around the world.
International corporations that perform conversion transactions through commercial banks and brokerages.
Individual traders that are looking to take advantage of the exchange rate fluctuations on the global currency exchange market.
The ECN system unites the financial market participants from all over the world with an opportunity to perform trading operations of any size, and thus increases the liquidity and transparency of the financial industry in general.