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ECN/STP Broker

  • Post #1
  • Quote
  • First Post: Edited Oct 13, 2010 12:42pm Oct 7, 2010 5:53am | Edited Oct 13, 2010 12:42pm
Hi folks,

It's been AGES since I posted here but I'm posting here now because it may be the only place that I'll get some 'straight' answers (and I'm assuming that this is the correct forum to be posting this question)!!! LOL!!!

One would think that after all this time I'd understand this but I don't actually:

EXACTLY WHAT is an ECN/STP Broker??? And what are the advantages / disadvantages (if any) of trading with an ECN/STP Broker??? And assuming that there are advantages: does anybody know of a decent ECN/STP Broker???
  • Post #2
  • Quote
  • Edited 7:22am Oct 7, 2010 7:11am | Edited 7:22am
ECN:

note the letter 'C' standing for:

Communication(s)

right.

meaning:

you and i are able to interact directly over this 'N' (yes, network), as well as of course (price making) Dealing Banks who are major liquidity providers, Central Banks etc. All of which interact with each other - they/we hit the Bid/join the Bid, or, lift the Offer/join the Offer.

So, this 'ECN Broker' will allow you to participate on this network via using his credit lines. This Broker himself might be a Tier 1 Prime Broker, or a Tier 2 PB - whatever the case, this PB has relationships/credit lines with various Banks.

(major)-Advantage(s): no conflict of interest (well, almost; or very, very little).

Which one to choose from?

Question is: how much trading capital does one have,

this will allow you to choose to either join a: Tier I PB or a Tier II PB - the higher in the hierarchy you are the better for you - cheaper 'running costs' overall, so to speak.

Best.
Quoting chistyle
For a good explanation of ECN and STP check out these links below

Electronic communication network

Straight-through processing

and I must Add

Direct Market Access


Yes, I would check out APBG...
Thanks for your first post ever on FF. Glad you aren't pushing a broker with it.
FXChant Singing the World of Forex
Dear fintrans,


An ECN is a live exchange type book working against the best bid/offer of all quotes. By trading through an ECN, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace. The banks also reduce their costs as there is less manual effort. Many brokers claim to be ECN brokers, however, their trading doesn't represent an order book. They derive their prices from an ECN system, but they actually provide only the best market BID/ASK quotes rather than an order book with market depth. You would be able to take full advantage of an ECN system only in case you have the market depth (providing full insight of the market), partial execution and the ability to place offers inside the spread.


We would like also to present our new ECN/STP module and encourage all traders to open demo account and test it. With one account in the ECN/STP module in Delta Trading our clients can trade with a several brokers among which FXCM, Deutsche Bank, Interactive Brokers and Deltastock at full transparency of the market. You can choose a specific liquidity provider, or execute your trade at the best current price regardless of the broker. You can even track with which broker your order was executed with and at what price. The ECN/STP module allows you to benefit both from lower spreads and lower transaction cost. Due to the competitiveness between the liquidity providers in the module the spreads falls down to 0.1 pips, which despite the commission of 0,003% - 0,005%, are still pretty competitive. And the lower transaction costs comes from the opportunity to trade from one account with different brokers, not to open different ones. If you have any questions we will be happy to help.


Regards,
Deltastock
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Quoting fintrans
Hi folks,

It's been AGES since I posted here but I'm posting here now because it may be the only place that I'll get some 'straight' answers (and I'm assuming that this is the correct forum to be posting this question)!!! LOL!!!

One would think that after all this time I'd understand this but I don't actually:

EXACTLY WHAT is an ECN/STP Broker??? And what are the advantages / disadvantages (if any) of trading with an ECN/STP Broker??? And assuming that there are advantages: does anybody know of a decent ECN/STOP Broker???
http://forum.mql4.com/31514
ECN is trading among other traders, while STP is passed on to a bank/liquity provider. The dealer is not taking the order, thus they should not take a opposite of your trade. Only market makers will. Assuming the ECN and STP is 100% just what they say there are.
  • Post #7
  • Quote
  • Edited Oct 14, 2010 2:56am Oct 13, 2010 12:48pm | Edited Oct 14, 2010 2:56am
Hey thanks everyone for the input etc.

I'm now testing Deltastock's L2 module but I have a question (for the Deltastock representative that posted above):

When I'm in the L2 module I see that I can select from the various counterparties as detailed here on your site: http://www.deltastock.com/english/platforms/level2.asp. What I CANNOT figure out though is why orders are only shown when I've selected 'Delta' as the counterparty (or 'SMART')??? In other words: if I select IB (which from what I gather is actually Interactive Brokers) then no orders are shown. I hope I'm asking the question correctly (if not: sorry).
Quoting codycuncan
ECN is trading among other traders, while STP is passed on to a bank/liquity provider. The dealer is not taking the order, thus they should not take a opposite of your trade. Only market makers will. Assuming the ECN and STP is 100% just what they say there are.
Dear codycuncan,

The definitions you give for ECN and STP are correct. Let me explain why we are a true ECN/STP and the reason we are a counterparty to all clients’ trades:

1. We think that the main idea of the Forex ECN is to resemble stock exchange trading as much as possible. For example, clients’ limit orders are displayed in the orderbook under Deltastock’s name. Moreover they could be placed within the spread, which actually creates additional liquidity. The limit orders submitted by the clients in the orderbook are immediately visible to all. Thus traders can place trade orders among themselves. That defines the true ECN environment in which we act also as a liquidity provider. That could be easily checked with other MT4 Brokers, which claim they are ECNs – you just need to place orders using two different accounts.

2. It is our policy to work with liquidity providers which are established and well known names in the industry – Interactive Brokers, Deutsche Bank, FXCM, Citibank, Dukascopy. Unfortunately we can add a limited number of liquidity providers, because of technological reasons. Deltastock keeps accounts with its providers and all orders are placed through those accounts. Subsequently, Deltastock remains a counterparty to clients’ trades, regardless that it acts as intermediary, since all orders are routed to the liquidity providers via the STP on our behalf.

3. If our goal were to mislead our clients about our ECN, that could have been easily done. Simply, we wouldn’t have shown the names of our liquidity providers in the orderbook, using the excuse that conflict of interest would have arisen, and we would have claimed that the quotes had been generated from more than 30 banks, brokers, etc. (Our price feed for fixed-spread quotes is based on the liquidity provided by a number of banks, brokers and market makers), and in the end none of clients’ orders would have been traced to any liquidity provider except to us.
In addition, if we were to mislead our clients and keep all their orders with us, there would have been no need to require a minimum and maximum order size, as are the requirements of our liquidity providers. In our case we do have a specific trading limit with our liquidity providers, which we hope to increase in time.

The fact that the names of our liquidity providers are shown next to their dealable prices and trade quantity indicates that we are providing a transparent ECN/STP.

I hope the above information provides a clear view of the functionalities of Deltastock’s ECN/STP module.

Best regards,

Deltastock
Quoting fintrans
Hey thanks everyone for the input etc.

I'm now testing Deltastock's L2 module but I have a question (for the Deltastock representative that posted above):

When I'm in the L2 module I see that I can select from the various counterparties as detailed here on your site: http://www.deltastock.com/english/platforms/level2.asp. What I CANNOT figure out though is why orders are only shown when I've selected 'Delta' as the counterparty (or 'SMART')??? In other words: if I select IB (which from what I gather is actually Interactive Brokers)...
Dear fintrans,

There are a couple of reasons why you may not be able to see offers from liquidity providers other that Deltastock:

 

  1. The liquidity providers do not provide offers for all currency pairs available in Delta Trading, so for some of them you will only be able to see Deltastock’s offers. Also, the liquidity providers have different work hours and you cannot see their offers in the interval when they are closed. Interactive Brokers, for example do not provide offers in the interval 00:00 EET – 00:30 EET.
  2. If you are a live client and have been so before we launched the ECN/STP module, you will need to renew your contract or you will only see “Deltastock” in the order window. If that is the case, please contact [size=2][email protected][/size] for information on how to proceed.

Best regards,

Deltastock

Hi there when you say banks are participating how do their prices coming to your ECN

Quoting DeltaStock
Dear fintrans,


[size=2]An ECN is a live exchange type book working against the best bid/offer of all quotes. By trading through an ECN, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace. The banks also reduce their costs as there is less manual effort....
Quoting Karol
Hi there when you say banks are participating how do their prices coming to your ECN
Dear Karol,

In Deltastock ECN/STP Level 2 module price quotes are streamed by our liquidity providers in real time. The liquidity providers include: FXCM, Deutsche Bank, Citibank, Interactive Brokers, and Deltastock (Dukascopy bank to be added soon). The competition between the liquidity providers in the system narrows the spread and can fall as low as 0.1 pips. When received, clients' orders are instantly transferred to the liquidity providers quoted in the ECN via the technology Straight Trough Processing (STP).

Best regards,
Deltastock
Quoting DeltaStock
the true ECN environment in which we act also as a liquidity provider.

Deltastock
you stated, Deltastock are one of the liquidity providers,
as I see it, this automaticly creates conflict of interest
since the client will either be buying or selling from Deltastock,
I also noticed in the demo, Deltastock allways have the lowest price,
so if I would chose to buy from IB and sell to citifx I would have to pay
a higher price, how do you manage to allways have the lowest bid ask price?
Bulls are stupid Animals!especially when Im short!
Quoting DeltaStock
Dear Karol,

In Deltastock ECN/STP Level 2 module price quotes are streamed by our liquidity providers in real time. The liquidity providers include: FXCM, Deutsche Bank, Citibank, Interactive Brokers, and Deltastock (Dukascopy bank to be added soon). The competition between the liquidity providers in the system narrows the spread and can fall as low as 0.1 pips. When received, clients' orders are instantly transferred to the liquidity providers quoted in the ECN via the technology Straight Trough Processing (STP).

Best regards,
Deltastock
Are you planning including more providers? And also it seems that the ECN works for Forex only. what other instruments you are considering including in the ECN part

Thank you
Dear Karol,

We have always being working for developing our services so it is possible that we will add more liquidity providers in our ECN/STP Level 2 module in future. We do not plan new providers or instruments to be added in the few coming months. We believe that so far we have built a good service where our clients can trade with 6 brokers just from one account at spreads starting from 0,1 pips for majour currency pairs.

Dear Roughtrader,

The spread you see in the L2 module is generated by the offers of all the providers that are included. It is possible that at times one broker can have the tightest spread but most of the time the best bid and ask offers come from different providers.
Deltastock also acts as a liquidity provider in the module in order to increase the competition and to ensure that there is enough liquidity at all times, as well as to give opportunity to people with smaller accounts to place orders in the module. Some of the offers generated by "Delta" are our clients' offers, while some of them are generated by Deltastock itself. Anyway, orders are executed against the best BID and ASK offer, so that in case Deltastock does not provide the best trading conditions at any given time your orders would not execute against it, therefore I do not see conflict of interest. Moreover, you could specify the counterparty you trade with, thus excluding Deltastock as liquidity provider.

Best regards,
Deltastock
Dear Deltastock,what about segregated funds?
Thx.
Dear seeza,


Deltastock AD is a broker regulated in Europe with branches in London, Madrid, Bucharesht and Sofia.
Our goal is to continuously improve our services and keep clients’ needs met.
In order to provide maximum protection and compliance with regulatory requirements Deltastock maintains accountability and segregates the clients' money securely.

Best Regards,
Deltastock AD
Quoting DeltaStock
Dear seeza,


Deltastock AD is a broker regulated in Europe with branches in London, Madrid, Bucharesht and Sofia.
Our goal is to continuously improve our services and keep clients’ needs met.
In order to provide maximum protection and compliance with regulatory requirements Deltastock maintains accountability and segregates the clients' money securely.

Best Regards,
Deltastock AD
Dear Deltastock, could you pls help us to get a better understanding and differentiate your services and benefits provided by you compared to e.g. Renesource Capital from Latvia. They are an ECN with really fast execution, seems to offer similar advantages, clients’ funds are held in segregated accounts from company’s accounts, broker is regulated by strict European Union laws and regulations and retail clients get protection through the investor compensation fund, etc. So the choice is not obvious.

I think would be useful for us regarding the ECN/STP brokerage selection, if you could help us pointing out, what you see to be really important from your practice for the retail traders in the ordinary course of everyday trading.

It would be much appreciated even if I know that is difficult to objectively comment on this - especially comparing yourself to others.

Thanks in advance.
Mind the gap
  • Post #18
  • Quote
  • Last Post: Jun 20, 2011 6:17am Jun 20, 2011 6:17am
Quoting Sunbrella
Dear Deltastock, could you pls help us to get a better understanding and differentiate your services and benefits provided by you compared to e.g. Renesource Capital from Latvia. They are an ECN with really fast execution, seems to offer similar advantages, clients’ funds are held in segregated accounts from company’s accounts, broker is regulated by strict European Union laws and regulations and retail clients get protection through the investor compensation fund, etc. So the choice is not obvious.

I think would be useful for us regarding...
Dear Sunbrella,

I would like to thank you for the interest in our services. I will try to explain what trading conditions are important in general and I will compare this information to the services Deltastock provides.

You gave as an example Renesource Capital, so let me start with them. Like many other brokers, including our company, they provide trading to retail clients through MetaTrader 4. In order to have a true ECN you need BID and ASK offers that include not only price, but volume as well, so that I believe you cannot have a true ECN in MT4. Renesource Capital provides ECN trading through Currenex as we do through our Delta Trading platform. However, Currenex is not for retail clients, but Delta Trading is.

Fast execution is a double-edged knife. It is easy for a company to execute orders instantly when spreads are higher, so that it doesn’t necessarily mean you receive good trading conditions. In general, it is better to have fast and seamless execution when other conditions are not affected. In this regard, our ECN module offers instant execution at very competitive spreads thanks to the STP technology used.

As a rule of thumb brokers having strict regulators like the FSA or the European Union directive MiFID are more reliable than others. Our company is also located in EU member country, so that we also fall under those regulations and our clients are also protected by clients protection fund. However, current EU regulations are subject to change, so that they are expected to become a lot tougher than they are now. Although this would add protection, it would also have some negative impact on the trading conditions for retail clients, e.g. increased margin requirements, higher spreads, additional trading costs and others. I believe all this will bring some shifts to the FX market one way or another, but we’ll see…

There are a few important features of ECN/STP systems that benefit clients compared to traditional trading. I will briefly describe them, but if you need more information I will be glad to provide further details.

-Each participant can act as a market maker, so that the other participants compete for his offers. This allows clients to place orders within the spread as well as to negotiate trades between each other.
-Avoiding intermediaries – there is no dealing desk and execution is fast and error-free.
-The identity of retail clients is not visible to other market participants, which ensures that they receive the same conditions as institutional players.
-Since there is not only one company that provides quotes (offers), but a few large institutions, there is much higher liquidity and therefore better pricing / lower spreads even during high market volatility.
-ECNs are transparent way of trading as clients can see market depth, which gives them much better market insight. They also receive post trade information to the detail.
-One feature that we provide, but is not typical for most ECNs, is the ability to choose a specific counterparty to trade with (valid for market orders only).

There might be other benefits as well, but those are the ones I believe are most important. In general, ECN/STP systems provide much more opportunities to traditional trading and therefore it is worth the effort to switch to such trading environment and see it for yourself.

Regards,
Deltastock
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