Okay before I ask let me prempt any sarcasim. Yes I am a noob, trying to learn as much as I can re prop firms, costs etc. what I can't seem to get my head around is how often do traders employ the ECN's? Basically i am trying to determine if these are a cost that I need to incorporate into my planning or if their is some flexibility. Thanks for humouring a noob.
ECNs are networks used to buy and sell on electronic exchanges. There is no way around them, you have to use one or another, and their costs or rebates vary somewhat widely between different companies.
Depends on which broker you use. For example, if you use Interactive Brokers, you can choose their Smart routing and IB will automatically route your order to the ECN with the best price. I wouldn't worry too much about selecting a specific ECN when you are just starting out, just have IB take care of it thru their Smart routing
and this is exactly why high-freq traders make money. you HAVE to care of what you are using, unless your trade horizons are VERY long. just by using "eh smart" ur losing quality of execution, which = $, which may mean a difference between a sucess and failure.
I used to trade on the Lightspeed platform and we had access to most large ECNs... They are good because they make executions faster and help with liquidity. Each ECN charges a fee if you TAKE LIQUIDITY (usually $2.95 for 1,000 shares)... google the exact definition....if you only do market orders, then you "take liquidity" (unless there is slippage). Each ECN gives a rebates (pays you) if you ADD LIQUIDITY (usually $2.50 on 1,000 shares)... This is when you actually put bids and offers in. If stock is at $12.34, you would add liquidity if you have a bid at $12.33 and your order gets filled. If stock is at $24.56 and you have offer at $24.57 and it gets filled, then you add liquidity too. http://en.wikipedia.org/wiki/Electronic_Communication_Network Here are the fees (unsure if updated): http://lightspeed.com/Lightspeed_Fee_Schedule.pdf