Recently, trading systems aimed at reducing the influence of the broker have started to become more widespread – Electronic Communication Networks or ECNs. And in the financial world there has more and more often been talk of ECN brokers and how ECNs are the future of Forex.
An ECN represents a floor or network in which liquidity providers and individual traders conduct transactions among themselves and cut out the middle-men. If we ask ourselves the question what the relationship of Forex is to ECN systems, we can say quite boldly that is that actual “interbank” that dealing centers and market makers so often mention. To be more exact, trading in the interbank currency market is performed thanks to ECN systems that bring together a multitude of participants in the currency and financial markets.
At the basis of the operation of any ECN floor lies a system of pairing orders. This means that trading orders from all ECN participants are entered into a common database. Opposing orders (buy/sell) from the various participants are executed when their basic parameters such as asset, volume and price, coincide, that is, the system automatically selects the corresponding orders and executes them. Characteristic of the interbank market is the fact that the clients’ orders for the purchase and sale of a given financial asset are executed at current market prices.
One of the key features of an ECN is the absence of conflict of interest between broker and trader. An ECN broker only transmits traders’ orders into the system (that is, brings them to the interbank) and earns money exclusively on the commission from each deal. Another no less important feature of the ECN is the possibility of taking part in price formation. Each trader can influence the spread, narrowing it by setting limit orders within the spread – the determining factor here will be the volume of the limit order. The greater the order’s volume, the greater the influence that it can exert on the current price.
One other distinguishing characteristic of the ECN system is the special process for executing pending orders. When the current quote for the trading instrument matches the value given in the pending order, the order is executed. However, in certain circumstances pending orders are executed partially. This is due to a discrepancy in the transaction sizes in offsetting positions.
An advantage of no small importance of the ECN is its transparency for traders — orders that have been received are shown in the system and the information on them is accessible to all participants in the trading.
At the present time more and more financial experts are arriving at the common opinion that the ECN system is a step forward towards transparent and easier trading in the currency markets, and it is good that these systems are at last gaining more and more popularity in the Forex market. Institutional players and the funds market have already long valued the advantages of ECN systems. Now this opportunity has also become available for the individual trader trading in the Forex market. Only a few years ago access was impossible for the ordinary retail trader to the major ECN floors such as Currenex, Integral or FXall.
Professional traders are gradually coming into the market now who operate with very large sums and wish to have a guarantee not only of the safety of their money, but also of receiving the profit they have earned. The activity of ECN brokers is, as a rule, regulated by more serious and reliable licensing than is the case with many dealing centers and small market makers, which guarantees the transparency of operation and reliability of the broker. Compared to the majority of dealing centers, ECN brokers offer a completely different level of conduct of transactions, higher speed for executing orders, and execution of them on the best terms existing for the trader at that moment.
In connection with ECN, one of its important analytical tools is worth mentioning. This is the combined “open bid book” or, as it is also called, “Level 2 Quotes”, which show the depth of the market. These Level 2 Quotes, presented in the form of a table, contain information on limit orders set by participants on the ECN floor for specific trading instruments, namely data on the volumes and prices of bids. In other words, in the table the trader can always see the lowest “Ask” prices and the highest “Bid” prices, and at the same time the corresponding volume of bids, for the instrument in which he is interested.
At the present time all of the more or less major market makers are introducing, or have already introduced, interbank accounts, because introducing them is a sign of a broker’s new level of development. Recently EXNESS has also been registering accounts for operating in the interbank market and offers traders the opportunity to start trading on its ECN-system, which brings together well-known liquidity providers and ensures order execution at the best prices.
EXNESS offers clients access to the interbank market through an ECN system the basis of which is a programmed “aggregator”, which coordinates the execution of client bids at best prices amongst the several well-known brokers connected to it. At the present time the following major brokers are the Company’s liquidity providers: ADS Securities, EXANTE, FXCMPRO and MARKET SECURITIES.
Before the launch of this project, all departments in our company completed a huge amount of work. Practically every EXNESS employee was involved in the creative process. A new company division was formed to implement the task and to provide subsequent support. The long-term preparation that went into launching the project was driven by the desire to create a unique service that was previously available only to a narrow circle of professionals. In full accord with our concept of accessible exclusivity, what was in the past only accessible to the top banks has now become accessible to every trader.
In following modern trends in the development of the Forex industry, EXNESS experts have tried, while working on implementation of the project to bring clients’ bids into the interbank market, to take into account all our clients’ wishes and preserve the best traditions of delivering service of the highest quality. First and foremost that means narrow spreads on the most popular instruments. Multibank liquidity from leading providers promotes the formation of the best prices. Secondly, the ability to replenish and withdraw funds from a trading account via many electronic payment systems. The new system retains the flexibility and convenience of adding and debiting funds to and from the trading account. Thirdly, it means the ability to hedge offsetting positions for one instrument in the MetaTrader 4 terminal. As always, nothing hinders our clients from applying their own trading strategies in the normal MT4 terminal. Fourthly, trade inside the spread — traders themselves can influence the best buy and sell prices by setting limit orders within the spread.
In summing up all of the above, it may be stated with confidence that the interbank currency market will indeed only continue to gain in turnover and grow steadily in the future, and our company will continue to develop along with it.
Sterling holds above $1.39, rises vs euro after Sunak’s generous budget
By Joice Alves
LONDON (Reuters) – Sterling held above $1.39 against the dollar on Thursday and gained versus the euro after British finance minister Rishi Sunak unveiled an expansive annual budget designed to prop up the economy.
Sterling is the best-performing G10 currency this year, with investors expecting Britain’s speedy vaccination programme will help the economy to recover from its worst annual contraction in 300 years.
As the locked-down country prepares to re-open, Sunak delivered what he hopes will be a last big spending splurge to get the economy through the COVID-19 crisis.
The UK economy will return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, Sunak said.
ING analysts said in a note to clients that the “generous budget” was well received and it was seen “to strike the right balance and support the spring recovery.”
Sterling edged 0.2% lower against the dollar to $1.3921 in early London trading,. Versus the euro, it gained 0.1% to 86.41 pence.
“Sterling is performing well …My sense is the budget measures bode well in the eyes of overseas investors,” said Neil Jones, Head of FX Sales at Mizuho Bank.
He said the measures and progress on vaccinations “add weight to the view the UK will stand at the forefront of the global COVID recovery”.
(Reporting by Joice Alves; editing by John Stonestreet)
FTSE 100 falls as high yields, inflation worries return to fore
(Reuters) – London’s FTSE 100 fell on Thursday, dragged by miners and bank stocks on concerns about rising bond yields and volatility in U.S. markets, while engineering company Meggitt fell after its annual profit halved due to the COVID-19 pandemic.
The blue-chip FTSE 100 index slid 0.5%, with mining stocks, including Rio Tinto, Anglo American, and BHP, leading the declines.
Resurgent worries about rising U.S. bond yields hit global shares as investors waited to see if Federal Reserve Chair Jerome Powell will address concerns about the risk of a rapid rise in long-term borrowing costs. [MKTS/GLOB]
Meanwhile, Bank of England policymaker Silvana Tenreyro said there was no good evidence that cutting interest rates below zero would, past a certain point, weaken Britain’s economy rather than boost it.
The domestically focused mid-cap FTSE 250 index fell 0.5%.
Ladbrokes owner Entain fell 2.0% after it held back declaring a dividend despite reporting a jump in 2020 earnings. It also said it was expecting online volumes to ease when shops re-open after surging during lockdowns.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V)
World’s biggest wealth fund puts Japan’s Kirin on watch list over Myanmar link
By Terje Solsvik
OSLO (Reuters) – The Norwegian central bank said on Wednesday it had put Japan’s Kirin Holdings Ltd Co on a watch list for possible exclusion from its $1.3 trillion sovereign wealth fund over the beverage giant’s business ties to Myanmar’s military.
Kirin on Feb. 5 said it would end its partnership with Myanma Economic Holdings Public Company Limited (MEHPCL), a company run by Myanmar’s army, after a military coup deposed the democratically elected government.
As part of its decision on whether to maintain its ownership in Kirin, the Norwegian fund will monitor the implementation of the company’s plan to end the ties, Norway’s central bank said in a statement.
Kirin’s decision effectively scraps the Myanmar Brewery joint venture, in which the Japanese firm’s controlling stake was valued at up to $1.7 billion, although Kirin also said it still wanted to keep selling beer in Myanmar.
Norges Bank Investment Management (NBIM), which manages the world’s largest sovereign wealth fund, held a 1.29% stake in Kirin Holdings at the end of 2020 with a value of $277.1 million.
“We remain focused on urgently implementing the termination of our joint-venture partnership with MEHPCL,” Kirin said in an emailed statement to Reuters.
“As part of this, we hope to find a way forward that will allow Kirin to continue to contribute positively to Myanmar. We value opinions and feedback from all of our stakeholders and are open to constructive engagement on this matter,” it added.
The Norwegian sovereign fund, formally called the Government Pension Fund Global and set up in 1996 to save petroleum revenues for future generations, owns about 1.5% of all globally listed shares.
Holding stakes in around 9,100 companies worldwide, it has set the pace on a host of issues in the environmental, social and corporate governance (ESG) field, and its decisions are often followed by other investors.
The bank separately said it would allow the wealth fund to invest again in Poland’s Atal SA, which had been excluded since 2017 for risk of human rights violations through its use of North Korean workers at Polish construction sites.
“As a result of a resolution in the United Nations Security Council, all North Korean workers have now been sent out of Poland. Therefore, there are no longer grounds for excluding the company,” Norges Bank said.
Atal did not immediately respond to an email seeking comment.
A third firm, Germany’s Thyssenkrupp AG, will be the subject of an “active ownership” process as the fund’s management seeks to probe the company’s anti-corruption work, Norges bank said.
“Norges Bank has been in dialogue with the company over a long period of time. We therefore have a good foundation for active ownership on the issues to which this matter relates,” the central bank said.
The fund held a 1.3% stake in the German firm at the end of 2020 valued at $147.1 million.
Thyssenkrupp did not immediately respond to an email seeking comment.
(Editing by Gwladys Fouche, Richard Pullin and Gerry Doyle)
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