ECN
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(a.k.a "electronic communications networks") are computerized
order matching and placing systems. When a Stock Trading order
to buy or sell a particular stock or security is sent to a particular
ECN, the order is matched to an equal and opposite order in
microseconds. Until quite recently, only institutions could
stock trade via ECNs.This allowed them to buy and sell stocks
outside regular stock market hours (and this, of course, is
when most earnings announcements took place - announcements
that move markets!). This was obviously bad news for the small
stock trading investor, who had to wait for the market to open.
The status quo ended in 1997, as Island Corporation opened to
the public. The growth in Stock Trading via ECNs has been extreme,
taking business away from more traditional methods such as phoning
your order to your broker. Due to execution speed and transparency,
ECNs have become the weapon of choice for many people Stock
Trading, however, for stock trading the Holy Grail from Tradestars,
they are essentially unnescessary, as unlike a day trader, you
know the price you want, and under what circumstances you want
to place it, and can instruct your broker accordingly, leaving
him to actually monitor the market and place the trade.
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