Ouch, Kathryn, you hit me in my weak spot (one of many <g>). An ECN is an "Electronic Something or Other." But, I know, sort of, what it does -- it is an electronic matchmaker for bids and asks. It automates what market makers on the Naz and specialists on the NYSE and Amex do, kind of. I say "kind of," because it only matches prices provided by sellers and buyers to effect trades, and doesn't do the price manipulation that the people do in the more traditional markets. A trade on an ECN costs a fraction of a cent per share as opposed to people, who often get several cents a share (which is why many MMs pay brokers for order flow). It is also the reason that people on the floors of the exchanges are so glum and down on the after-hours trading proposition.
Another good thing about ECNs is that the Level II "waterfall" (list of bids and asks above and below current prices) can be shown to everybody without extra cost. An example is "Island" owned by Datek that handles a large porton of their Naz trades - it is available for viewing by anyone. You can see it at
isld.com
I'm sure some person smarter than me will post with what the "C" and the "N" stand for, and hopefully will provide a better explanation than I can.
Next time, please ask me something that I know! :-)
jim |
