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ECN - How is it set up?

Discussion in 'General Forex Talk' started by BlueMental, Jan 6, 2010.

  1. BlueMental

    BlueMental Private

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    Electronic Communications Network, offered by various brokers, but how does a brokerage go about actually linking to the ECN?

    If a 'Market Maker decided to become a legitimate brokerage firm, what criteria do they need to be able to link in to the ECN and who do they contact to get linked?

    Do they need specific software or hardware for security reasons, or is the data transferred via the net?

    Does anybody know anything about this, since I can not find any details about the 'how to' regarding ECN on the web.

    BlueMental
     
  2. cowmadagan

    cowmadagan Sergeant

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    I think that a broker could qualify as an ecn if they merely resolve your orders quickly with no slippage in house on the condition that it's comparably as fast as connecting to bank, institution, or whatever out of house entity is the 'other'.
    I believe a market maker is a broker with enough dough that if they had a whole whack of clients whom had already placed stops, they would intervene and use their massive assets to artificially spike the price in the market far enough to collect the realized loss of their own clients.
    I think you mean a bucket shop. A bucket shop just pretends they took your orders to market, but didn't.
    My source for this is the FSA's guidelines about market making. That doesn't mean I'm right though.
     
  3. BlueMental

    BlueMental Private

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    They have absolutely no need to use their massive assets to create the spike, they simply put one in their data to customer feed and there go all the SL's in one easy swoop.

    The word broker by definition in the dictionary is:
    Noun: broker
    1. A businessman who buys or sells for another in exchange for a commission
    Verb Broker
    1. Act as a broker

    Here is a very good description of the differences between Market Makers and ECN Brokers etc. ECN brokers list | ECN/STP Forex brokers

    But in truth only ECN brokers are actually brokers.

    As far as the fact that bucket shops that try to improve their image by calling themselves market makers is concerned is very much the same like a prostitute calling herself an escourt agent.

    A bannana is still a bannana regardless of which monkey is eating it.

    Blue Mental.
     
  4. cowmadagan

    cowmadagan Sergeant

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    There are two problems with that. One is that the ones who were betting the opposite direction of the ones targeted by the spike would profit.
    The second, and more important one, is that many traders get their feeds from more than one source, especially if there's a suspicion. If spikes show up only in the broker's feed and nowhere else, it's a pretty open and shut case, so bigger companies can't practically do that as the regulators must have their own feeds too.
    There's also a separate category of brokers who aren't allowed to make any investments and that is to protect clients from the mismanagement that can happen at an investment firm.
     
  5. Pharaoh

    Pharaoh Colonel

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    There are reports of different clients getting different feeds from the same brokerage. A 1 pip difference between 2 accounts on different servers is one thing, but there are cases of more significant issues.

    Since forex is decentralized, the regulators (for those brokerages that are regulated) really can't do much except in the most egregious cases.
     

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