What is an Electronic Communication NetWork (ECN)?
Commonly known as an ECN, an electronic communication network is a system for trading financial instruments that takes place outside of the markets and is sanctioned by the Securities and Exchange Commission (SEC). An ECN connects buyers and sellers over a network that eliminates the need for an intermediary such as a broker or investment bank.
How Does an Electronic Communication NetWork (ECN) Work?
An ECN brings together buyers and sellers of financial instruments and enables them to trade available securities and currencies. The ECN is the intermediary and charges either transaction fees per share or amount traded, or automatically adjusts prices slightly up or down, profiting from the price difference.
The Nasdaq market is an example of an ECN. Rather than a physical location such as the New York Stock Exchange, the Nasdaq is a network of securities traders who engage and trade directly with one another.
Currency trading also takes place on an ECN. Spot trades can be made almost immediately, and the trading platform allows the trader to view all of the currency available for trading along with the associated prices and price changes.
Why Does an Electronic Communication NetWork (ECN) Matter?
Electronic communication networks allow individuals to communicate almost instantly regardless of geographic location. This makes ECNs an effective way for individuals to come together and make direct trades. ECNs have also made the financial markets more efficient and more global.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Just when you think you're on the right track financially, it happens. Your water heater breaks, you end up in a fender bender or your niece decides to have a destination wedding in the...Read More →
If your image of bankruptcy is soup kitchens or the fallout from high-rolling excess, you need to...Read More →
Wall Street can be so predictable sometimes. A company announces an acquisition. The buyer's ...Read More →