ECN
Also known as: electronic communication network
An ECN, short for electronic communication network, is an automated system that matches buy and sell orders directly between market participants without routing them through a traditional exchange floor or a human intermediary. Orders sent to an ECN are matched against other orders sitting in its own based on price and time priority, and trades execute automatically the moment a buy and sell order match up.
ECNs became a major part of US trading because they let , , and institutions trade with each other directly and quickly, often outside normal exchange hours as well as during the regular session. Much of in US happens through ECNs, since they do not depend on a physical exchange being open. They are also one of the categories of venues, alongside , that fall under the broader label of , though some ECNs are registered and operate more like a full exchange.
For an , an order rarely gets manually labeled as going to a specific ECN, the 's system decides where to send it based on price and available across every venue it can access, ECNs included. What matters practically is that ECNs add another layer of competition and speed to how orders get matched, which over time has been one of the forces pushing narrower and execution faster across the market.