Understanding Currenex

What is an ECN?

In many instances the term ECN is used when referring to Currenex.  An ECN, which stands for Electronic CommunicationsNetwork, attempts to eliminate the role of a third party in the execution of orders.  This allows all market participants, big and small, to interact with Bid and Offer prices that are posted by other market participants.  Some of the better known ECNs are ARCHIPELAGO (purchased by the NYSE in 2006) and ISLAND. The advent of ECNs led to greater transparency as well as spreads that narrowed dramatically. 

What is an ESP?

Currenex refers to it's system as offering Executable Streaming Prices or ESP™. Currenex connects to multiple sources of liquidity, primarily banks, that offer "pools of liquidity" for better price discovery and drastically narrower spreads for traders. The prices that are offered on Currenex can be executed within these various pools of liquidity. In the past, a trader would be required to obtain a Prime Brokerage relationship with one or more of the major liquidity providers. Currenex is now being offered through brokers to retail trading public without the very high threshold and high expenses traditionally associated with establishing a Prime Brokerage account. 

Not all Currenex Brokers are the same.

It is important to remember that Currenex is only as good as the liquidity that it is connected to the system. This can lead to dramatic differences in price spreads between a broker that offers 1-2 banks versus a broker that offers 8-10 banks.  Finding a broker that offers "Tier 1 Liquidity" is essential to taking advantage of the Currenex trading system.

What is Straight Through Processing or STP?

The term STP is commonly used among Forex brokers. Many Forex brokers will use "interbank pricing" but will be acting as a counter party to the trades themselves. A true STP broker will facilitate the transaction through to the liquidity source. This should result in trade execution at the best possible price without interaction on the part of the broker.