The history of ECN. Curious facts and figures.
We invite all those who like ECN trading to make a small journey into the past and learn important steps in the development of the ECN systems. It appears that ECN has long gained its popularity in the Forex market for its flexibility, availability, and the opportunity to make transactions at the best prices. The Electronic Communications Network (ECN) globalizes the market, which enables you to make trade operations regardless of the time or place of your location. The main advantage of this is not only market access 24/5, but also a huge number of participants offering their quotes. Electronic data processing and modern means of communication rapidly provide market participants with all the necessary trade information and support the highest speed of transaction execution. Did you know that an innovative and modern ECN network began its history as far back as 1960s?
The origin of ECN. The prototype of the first modern ECN network was the Instinet system. The company itself was founded by Jerome M. Pustilnik and Herbert R. Behrens and began its operation in 1967 as Institutional Networks Corp. INCA founders sought to compete with the NYSE via computer networks between the major institutions, such as banks, mutual funds and insurance companies, without delays or human interference. The company provided computer services and networks for an automated purchase and sale of equity securities on a confidential basis through the Instinet system, which began operating in December 1969.
In the 1970s, the introduction of the platform was very slow. Therefore, in 1983, Instinet turned to William A. "Bill" Lupien and invited him to take the post of president of the company. During his management time, Instinet has significantly increased its trading volume and became the object of study at two Harvard Business Schools. William Lupien decided to launch a more aggressive system. Along with his like-minded associates, he successfully implemented a number of innovative features that have made Instinet an essential tool for traders. In the mid-80s the company began to actively develop and conquer new objectives in trading.
Black Monday. Black Monday became an event that affected the further development of ECN in general and the Instinet company in particular. In the beginning of 1987 stock markets grew at an incredible rate worldwide. The US economy was on the rise. It seemed that there was no evident reason for the collapse. Black Monday — Monday, October 19, 1987 — is the day on which there was the largest drop in the Dow Jones Industrial index in its history — 22,6 %. This event has affected not only the US but also instantly spread around the world. For some time after the collapse trading on global stock markets was limited, since computer technology of the time could not process a large number of incoming orders. This restriction has allowed the Federal Reserve and central banks to take action to suppress the spread of the global financial crisis. The most surprising thing is that Black Monday virtually had no impact on the situation in the real economy. 2 years later a steady growth of global stock markets began.
The Renaissance of ECN. In the 1990s the Securities and Exchange Commission has introduced new individual investor protection rules. Securities and Exchange Commission (SEC) accepted the Rules of ATS, which enabled the ECN systems to register as a stock exchange or other regulatory mechanisms under a separate set of standards for ECN. Meanwhile, Instinet and Island became the largest ECN systems (part of the Instinet company separated and united with Island into a structure called Inet, which was later purchased by NASDAQ), Archipelago Exchange and Brut. The ECN systems were experiencing revival following the adoption of new trading rules by SEC that "require trading by protecting orders in the market, regardless of where these orders are placed". These events gave rise to a new stage of development of the Electronic Communication Network. Significant technical modernization, changes in legislation and the emergence of healthy competition had a positive impact on the growth and further development of the Electronic Communications Networks.
The future. More and more often we see such advertising slogans on the Internet:
“ECN Broker is the Future of Forex!” And it’s difficult not to agree. Previously it was thought that in order to maintain high liquidity in the market you need to have the greatest possible exchange attendance. Today, any trader can directly access a variety of different markets with different levels of liquidity thanks to computers and the Internet. Past times will not return. Why ECN is the future of Forex trading? Firstly, due to the progressiveness of technology that leaves no chance to the old methods. And secondly, through the support of networks by FX titans. When trading through ECN, traders benefit from greater transparency in prices, fast execution of orders, increased liquidity and a larger volume of market supply. Banks also reduce their costs as all operations carried out through ECN are automated and require less involvement of employees. All of this allows individual traders to make profit and helps large financial players get real benefits from the transactions.
Therefore, choosing a broker, it is recommended to pay attention to the availability of ECN accounts, which indicates modern and open approach of the broker to trading. All ECN account types, including PAMM accounts of the European licensed broker Forex.ee are available at this link:
www.forex.ee
How did you start trading on ECN? What were your first impressions? Share your comments with the ECN Club members.
