Electronic Communications Network
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Template:Mergewith Electronic Communications Network (ECN) is a term used primarily in technology arm of financial and banking institutions, e.g. FX (Foreign exchange market). An ECN is an electronic channel to market, typically one that is open to access by multiple parties. The opposite to an ECN is a proprietary online trade execution system.
By trading through an ECN an FX client 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.
Examples of ECNs are 'white-label' (where the service can be rebranded by an associate organisation), FXall, FX Connect, Currenex, Hotspot, 360T and eSpeed.
ECNs are also used to trade equities (Stocks). Several ECNs became quite active in the United States starting in the late 1990's, including Instinet, Island, Archipelago and Brut. By 2004, a very large portion of shares traded in the US was actually done by the ECNs rather than in more traditional venues like stock exchanges. The ECNs have increased competition by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours. ECNs start trading before 9:30 and continue to trade after 4pm US/Eastern time. Archipelago ECN has announced their intention to start trading at 4am starting in March 2005.
The exchanges have followed suit; some also acquiring or being acquired by ECNs. Instinet and Island merged into Inet, Archipelago Exchange purchased the Pacific Exchange, and Brut has been purchased by Nasdaq.
External links
- Definition (http://www.ftmarketwatch.com/dictionary/Electronic_Communication_Network.html)
- Inet (http://www.inetats.com/)
- Archipelago (http://www.tradearca.com/default.asp)
- Brut (http://www.nasdaqtrader.com/eBrut/home.shtm)
- FXall (http://www.fxall.com/)