Written By: Ehsan Jahandarpour

An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside of traditional stock exchanges. An ECN is generally an electronic system that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part.The primary products that are traded on ECNs are stocks and currencies. ECNs are generally passive computer-driven networks that internally match limit orders and charge a very small per share transaction fee (often a fraction of a cent per share). The first ECN, Instinet, was created in 1969. ECNs increase competition among trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours. ECNs are sometimes also referred to as alternative trading systems or alternative trading networks.