I discovered this in a book it explains all about ECN, I hope it will help :
ECN is short for Electronic Communiions Network, and Foreign Exchange brokers who fall into this egory will usually charge a small trading commission or fee. Bear in mind, there's absolutely no such thing as a free lunch, and whilst 'trading' may appear attractive keep in mind that the prices will probably probably be concealed from the spreads. The ECN broker can be considered transparent. You've paid for a service, the trade, and the broker has left his or her cash. In many ways this is like trading stocks or futures. You are charged a commission and the trade is executed. An ECN broker in the Foreign Exchange world operates in the exact same way. They provide Foreign Exchange traders with a marketplace where all the participants, however large or small, can trade against each other by sending competing bids and offers into the system. In some ways, you can think about this as a 'exchange' there traders buy and sell in complete anonymity and with transparency. All orders are matched between counter parties in real time, however in order to get a Foreign Exchange trading broker to be classified as a genuine ECN, the brokerage must display something called DOM or 'Depth of Market' in an information window, to show customers their particular order size inside the system, and allow
other customers to trade against these orders. In other words, Foreign Exchange traders should be able to see the liquidity, and execute transactions. Put simply, it means transparency!
ECN brokers will always offer varying spreads, and since they don't make their money on the spread between the bid and the ask, any trading fashion (including scalping) ought to be permitted. Some Foreign Exchange brokers do not permit this style of trading, and as you will see, when we reach the questions to ask, this can be on the list. In the past couple of years, the conditions of trading have shifted dramatically and also there are questions you need to ask before opening your account to guarantee your style of trading is permitted by the broker.
An ECN broker can therefore be considered, in my opinion at any rate, as the purest type of broker. They make their money from your commissions charged and are therefore eager for their clients. After all, if you are successful you'll trade more actively and generate more commissions to the broker. It is a win/win situation. However, many new Foreign Exchange traders have been 'sold' on the benefit of 'free' trading, and fail to realize the advantages of paying a small commission in return for a honest and transparent trading environment. It's only when Foreign Exchange traders have experienced their stops being hit 'market
spikes', absurd market moves against their rankings, and endless 'server problems', these same traders start to appreciate the benefits of a legitimate ECN broker.
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