Aggregation – in search of the best price
Do you remember that any OTC market in general, and the FX in particular, is highly fragmented? There are multiple market participants offering different prices for the same asset at the same moment in time.
This is true for any market participant and any trading venue, and ECNs are no exception. If ECNs were closed systems without any links to the outer world, then the price could potentially be very different from prices in the rest of the FX market. Indeed, if we have there an exchange-like trading venue then even though bids and asks are posted by only a small group of qualified members, the price will be determined by supply and demand, quite like in any other market. This means that price takers will be those who drive the price up or take it down. In a closed system, the price is determined only by members of this system.
It may seem that theoretically nothing prevents the price of the same euro versus the US dollar to be...
