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Finance: What is Electronic Communication Network (ECN)? 12 Views

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Description:

What is Electronic Communication Network (ECN)? In order to facilitate the exponential increase of trading volume in the markets, any financial institution seeking to conduct its own trades or trades on behalf of clients is required by the SEC to have a connection to Instinet, SelectNet, Archipelago, or one of the other established systems, which are called Electronic Communication Networks. ECNs match trades and display best bid and offer in real time from whoever is on the system from all over the world.

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Transcript

00:00
Finance a la shmoop what is the electronic communication network or ECN?
00:09
all right it's the computerized and wired version of this for a small fee [Large computer network]
00:15
traders can plug in to a network to trade stocks you know think about it
00:20
like Facebook for stock traders only with less political ranting and fewer
00:24
photographs of babies and freshly cooked meat generally well generally speaking [A pan of meat and potato's appear]

00:29
ECNs are "off-market" that is they aren't really directly part of
00:35
an established trading system like the New York Stock Exchange or Nasdaq or one
00:39
of the other blessed exchanges they connect market makers directly to third
00:44
parties allowing them to trade to their heart's content there aren't a lot of
00:48
actual physical hands at work here most of the limit orders are matched
00:53
electronically the network charges its fee the transaction is processed and [Company share price appears]
00:58
life moves on so think about it like it's 2:00 a.m. on a Saturday and Joe who
01:03
likes to trade in his underwear don't ask us why it's just dying to sell a [Joe sits down at PC]
01:07
hundred shares of coke to Betty who likes to trade while head-banging to Led
01:12
Zep and you know likes to trade with Achmed who's saving money for an air
01:17
conditioner yeah well no sweat so this is perfect for anyone who wants to
01:21
become active in the trading of stocks but hates any kind of physical human [Man waving to woman and woman walks by]
01:26
interaction yeah don't worry the robot rebellion will soon be upon us and ECNs
01:31
will rule the roost
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