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Encyclopedia > Electronic Communication Networks

An Electronic Communication Network (ECN) is a computer system that facilitates trading of financial products outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies. It has been suggested that shareholder be merged into this article or section. ...

ECNs came into existence in 1998 when the SEC authorized their creation. The United States Securities and Exchange Commission (commonly known as the SEC) is a United States government agency having primary responsibility for enforcing the Federal securities laws and regulating the securities industry. ...


The functioning of ECNs

In order to trade with an ECN, one must be a subscriber. ECN subscribers can enter limit orders into the ECN, usually via a custom computer terminal or a direct dial-up. The ECN will post those orders on the system for other subscribers to view. 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. 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 or reserve size, 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. ...

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 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 privately-owned by the NYSE Group (NYX). ...

ECNs and the currency market

By trading through an ECN a currency trader generally gets a better price than trading by voice over the phone. Other benefits are 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. In the physical sciences, specifically in optics, a transparent physical object is one that can be seen through. ... Market liquidity is a business or economics term that refers to the ability to quickly buy or sell a particular item without causing a significant movement in the price. ... Banker redirects here; see wiktionary:banker for more meanings. ...


ECNs were created out of the Nasdaq Market Makers Antitrust Litigation led by lawyer William Lerach. The litigation alleged collusion among Wall Street traders, and was proven in 1998, leading to a $1 billion settlement from major Wall Street firms. At the time of the settlement, the SEC also put in a new regulation, the Limit Order Display Rule (rule 11Ac1-4), which authorized "electronic communication networks", or ECNs. Nasdaq Market-Makers Antitrust Litigation - class-action lawsuit initiated in 1996 alleging collusion amongst Wall Street traders. ... Elaborate marble facade of NYSE as seen from Broad and Wall Streets For other uses, see Wall Street (disambiguation). ...

Major ECNs that became active at this time were Instinet and Island, (which were since merged into INET and acquired by NASDAQ), Archipelago Exchange (which was acquired by the NYSE), Brut (now acquired by NASDAQ), and NYFIX. Another example of an ECN would be Bloomberg's TradeBook. 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 a financial news service founded by Michael Bloomberg in 1981. ...

ECNs increased competition amongst trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours.

See also

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ...

External links

  Results from FactBites:
The Privacy and Electronic Communications (EC Directive) Regulations 2003 (7784 words)
Where a provider of a public electronic communications service provides facilities for calling or connected line identification, he shall provide information to the public regarding the availability of such facilities, including information regarding the options to be made available for the purposes of regulations 10 and 11.
Regulation 10 requires a provider of a public electronic communications service to provide users of the service with a means of preventing the presentation of calling line identification on a call-by-call basis, and to provide subscribers to the service with a means of preventing the presentation of such identification on a per-line basis.
Regulation 23 prohibits the sending of communications by means of electronic mail for the purposes of direct marketing where the identity of the person on whose behalf the communication is made has been disguised or concealed or an address to which requests for such communications to cease may be sent has not been provided.
Vehicle bus - Wikipedia, the free encyclopedia (733 words)
The main driving forces for the development of vehicle network technology have been the advances made in the electronics industry in general and government regulations imposed, especially in the United States, in order to make the automobiles environmentally friendly.
Networks were not new, but their application to the vehicle was.
Although the vehicle network did not place too much emphasis on the data throughput, the demand for more on-board computing is continuing to drive changes to these networks to provide higher-speed communication between modules.
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