What Is an Electronic Communication Network?

Electronic Communication Network (ECN) refers to the electronic trading platform between financial exchanges, stock brokers and their customers. Now, the term is more widely used in computer network and communication network science.

Electronic communication network

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Electronic Communication Network (ECN) refers to financial

In the financial industry, ECN refers to a type of

The ECN adopting the traditional charging form will charge a small fee to all market participants using the ECN, regardless of whether it is a provider or absorber of liquidity. Of course, ECN will charge less for traders who provide more liquidity in order to attract trading volume. The cost of such an ECN ranges from $ 0 to $ 0.0015 per share, depending on the specific ECN. Most of the ECNs on the New York Stock Exchange (NYSE) in the United States use traditional fees, but some ECNs have adjusted their fees to rebates.

ECN Electronic communication network ECN and foreign exchange market

Forex trading through ECN can get better prices than over the phone, while the quotes are more transparent, transaction processing is faster, more liquidity and stronger stability. The cost of foreign exchange ECN is also reduced because the system rarely requires manual intervention.

History of electronic communication networks

The "NASDAQ Market Maker Antitrust Litigation" initiated by lawyer William Lerach gave birth to the ECN system. The lawsuit found collusion between Wall Street dealers, which was confirmed in 1998, leading to up to $ 1 billion in settlements by major companies on Wall Street. At the same time as the settlement, the SEC introduced a new regulatory rule-the "Limit Order Display Act (Decree 11Ac1-4)", authorizing the formation of ECN.

The more active ECN systems of that era mainly included Instinet, Island (a part of Instinet merged with Island into INET and was acquired by NASDAQ), Archipelago Exchange (later acquired by NYSE), Brut (later acquired by NASDAQ), and NYFIX. Bloomberg's TradeBook is one of them.