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Within the context of the SOES system I used last year, an ECN was
an method of placing my shares up for sale. There were about eight
of them. The two I remember were ISLAND and BLOOMBERG. By
using an ECN I could attempt to sell my shares at the ASK or
buy shares at the BID, or I could buy/sell in the spread and become
the inside market. From a Level II point of view, my order looked
like a market maker and in a way I was competing with the the MMs.
There are a couple of problems with using many of the ECNs. The
first is that if you received a partial fill, the rest of the order was
canceled and you had to resubmit the order. For example, imagine
a fairly volatile market and you place your shares up for sale with
an ECN timing the move perfectly only to have 100 of your 1000
taken and now be holding 900 shares as the market moves against
you. By the time you get out of the remaining 900 shares you might
have lost a point or more. The second problem is that you tip your
hand and may actually slow or stop the momentum of the move you
are depending on to get out of your position.
An alternate is INSTANET in which you can bid or offer directly to
all the market makers or any particular market maker. It has its
own set of problems, but can be very useful.
== Rob ==
>
>ECN = Electronic Crossover Network
>
>It's the screen that shows the Market Makers and the alleged size of their
>current Bid/Ask -- It theoretically allows you to click on a Particular MM
>or other player (such as Island, Archipelago, etc.) and transact your trade
>directly with them as opposed to just giving the order to a Broker and
>having them execute it whenever and with whomever they wish.
>____________________________________
>At 10:18 AM 8/27/98 -0700, you wrote:
>>OK, what the devil are ECN's ??
>>
>>donc
>>
>>> While SOES is still
>>>in use, it has declined in popularity, and ECN's are taking over as the
>vehicle
>>>of choice for stock daytraders. *****
>>
>
>
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