FP Markets Advantages

ECN Model

ECN stands for Electronic Communications Network. As a concept, it is exactly the same concept as an exchange (such as the ASX or NYSE). In FX there is no central exchange. Rather, contracts are traded Over the Counter (OTC). That means that people trade directly with each other rather than going through a central point. An ECN brings all these OTC traders together and provides a matching service where market makers can offer their prices and compete against each other to show the best price. This leads to the spread being as narrow as possible. This is clearly demonstrated on our spread comparison tool.

There is a similar concept called DMA which is used in other markets which have central exchanges.

How Forex ECN Works

aggregation

You can see from the example above that combining prices from a selection of providers can lead to very narrow spreads.

What is an FX Market Maker?

Market Makers derive their prices from other FX providers. Because there is no central exchange, there is no transparency around what their source price is. As an intermediary a Market Maker has the ability to alter prices in their favour, causing slippage which can be a significant cost of trading. Market Makers do not hedge 100% of their CFD positions and have the potential to profit from client losses. When trading through a Market Maker orders are at the discretion of a dealer. CFD orders are not placed directly on the market but flow through a dealer, which may result in orders being filled at inferior prices, so trading is slower especially in fast moving markets.

Price re-quotes or order rejections make it very hard to get decent execution and the inability to trade in market auctions means less liquidity.

The flow chart below illustrates how all orders and price feeds flow directly through a dealer and that all decisions are at the dealer’s discretion.

fx-flowchart

FP Markets FX

FP Markets exclusively uses LMAX ECN services. We never bet against our clients. We take the best spreads we can source in the market and pass them onto our customers.

We believe that the number of awards we have been honored with pay testament to our ongoing philosophy of giving the best possible service to our customers. Offering competitive spreads, fully transparent charging and industry leading customer service, has lead to independent research showing that we have the most satisfied customers in the industry.