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This article describes the term "electronic communication network" as used by financial exchanges, stockbrokers and the financial industry. The more generally used meaning of the term is described at computer network and communication network. For the scientific and engineering discipline studying computer networks, see Computer networking. ...
A telecommunications network is a network of telecommunications links arranged so that messages may be passed from one part of the network to another over multiple links. ...
An electronic communication network (ECN) is the term used in financial circles for a type of computer system that facilitates trading of financial products outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies. ECNs came into existence in 1998 when the SEC authorized their creation. ECNs increase competition among trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours. This article does not cite any references or sources. ...
“Securities and Exchange Commission†redirects here. ...
The functioning of ECNs
In order to trade with an ECN, one must be a subscriber. ECN subscribers can enter orders into the ECN via a custom computer terminal or network protocols. The ECN will then match contra-side orders (i.e. a sell-order is "contra-side" to a buy-order with the same price and share count) for execution. The ECN will post unmatched orders on the system for other subscribers to view. Generally, the buyer and seller are anonymous, with the trade execution reports listing the ECN as the party. An order in a market such as a stock market, bond market or commodities market is an instruction from a customer to a broker to buy or sell on the exchange. ...
Some ECNs may offer additional features to subscribers such as negotiation, reserve size, and pegging, and may have access to the entire ECN book (as opposed to the "top of the book") that contains important real-time market data regarding depth of trading interest.
ECNs and the stock market For stock, ECNs exist as a class of SEC-permitted Alternative Trading Systems (ATS). As an ATS, ECNs exclude broker-dealers' internal crossing networks – i.e., systems that match orders at the broker-dealer using prices from an exchange, without actually sending the order to a public venue. Alternative Trading Systems are SEC-approved non-exchange trading venues. ...
A crossing network is an electronic financial network for matching orders for execution without first routing the order to an exchange or market center (ATS, ECN, etc) where the order would be accessible for public viewing. ...
ECN fee structure ECN's fee structure can be grouped in two basic structures: a classic structure and a credit (or rebate) structure. Both fee structures offer advantages of their own. The classic structure tends to attract liquidity removers while the credit structure appeals to liquidity providers. However since both removers and providers of liquidity are necessary to create a market ECNs have to choose their fee structure carefully.
In a credit structure ECNs make a profit from paying liquidity providers a credit while charging a debit to liquidity removers. Their fees range from $0.002 to $0.0027 per share for liquidity providers, and $0.003 to $0.0025 per share for liquidity removers. The fee can be determined by monthly volume provided and removed, or by a fix structure, depending on the ECN, and it's known as a liquidity rebate, or credit. This structure is common on the NASDAQ market. In a classic structure, the ECN will charge a small fee to all market participants using their network, both liquidity providers and removers. They can also give lower price to large liquidity providers in order to attract volume to their networks. Fees for ECNs that operate under a classic structure range from $0 to $0.0015, or even higher depending on each ECN. This fee structure is more common in the NYSE, however recently some ECNs have moved their NYSE operations into a credit structure. NASDAQ in Times Square, New York City. ...
The New York Stock Exchange (NYSE), nicknamed the Big Board, is a New York City-based stock exchange. ...
ECNs and the currency market By trading through an ECN such as FXMarketSpace a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace. The banks also lower their costs as there is less manual involvement. FXMarketSpace is a 50/50 joint venture between Reuters and the Chicago Mercantile Exchange (CME) to provide an anonymous, centrally-cleared marketplace for currency traders. ...
In the physical sciences, specifically in optics, a transparent physical object is one that can be seen through. ...
Market liquidity is a business, economics or investment term that refers to an assets ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. ...
For other uses, see Bank (disambiguation). ...
History The first true ECN was the Nasdaq over-the-counter quotation system, created by the National Association of Securities Dealers in February 1971. Nasdaq was created following a 1969 American Stock Exchange study estimated that errors in hand-written securities order processing cost brokerage firms approximately $100 million per year. The Nasdaq system automated such order processing and provided brokers with the latest competitive price quotes via a computer terminal. Later, more advanced ECNs would develop from regulatory changes that developed out of a 1994 U.S. Justice Department investigation of possible antitrust violations by Nasdaq itself. This antitrust investigation was sparked by a March 1994 study by two economists, William Christie and Paul Schultz, which noted that Nasdaq bid-ask spreads were larger than was statistically likely, indicating "an implicit agreement among market makers to avoid using odd-eighths in quoting bid and ask prices..." As part of Nasdaq's settlement of these antitrust charges, Nasdaq adopted new order handling rules that integrated ECNs into the Nasdaq system. Shortly after this settlement, the SEC adopted Regulation ATS, which permitted ECNs the option of registering as stock exchanges or else being regulated under a separate set of standards for ECNs.
Major ECNs that became active at this time were Instinet and Island (part of Instinet was spun off, merged with Island into INET, and acquired by NASDAQ), Archipelago Exchange (which was acquired by the NYSE) and Brut (now acquired by NASDAQ). Another example of an ECN would be Bloomberg's TradeBook. Inet (previously known as Island ECN) was an Electronic Communication Network that is currently operated by NASDAQ. Category: ...
NASDAQ in Times Square, New York City. ...
In January 1997, the U.S. Securities and Exchange Commission (SEC) implemented new Order Handling Rules that revolutionized trading in NASDAQ® securities. ...
New York Stock Exchange (June 2003) The New York Stock Exchange (NYSE) is one of the largest stock exchanges in the world. ...
Brut can mean many different things: Brutus of Troy (also known as Brut, Brute) was a legendary British character. ...
Bloomberg L.P. is the largest financial news and data company in the world, controlling 33% of market share. ...
See also The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ...
EBS (Electronic Broking Services) was created by a partnership of the worlds largest foreign exchange market making banks. ...
FXMarketSpace is a 50/50 joint venture between Reuters and the Chicago Mercantile Exchange (CME) to provide an anonymous, centrally-cleared marketplace for currency traders. ...
Active ECNs
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