Current Issues in Economics and Finance

The Emergence of Electronic Communications Networks in the U.S. Equity Markets

October 2000Volume 6, Number 12
JEL classification: G24, G28, G18

Authors: James McAndrews and Chris Stefanadis

Recent regulatory and technological changes have spurred the development of automated trading systems known as ECNs, or electronic communications networks. Proponents of the networks contend that ECNs can cut transaction costs, accelerate trade execution, and expand the price information available to investors. While some critics have questioned the effects of the ECNs on market integration, it is clear that the networks are poised to play an increasingly important role in the new electronic environment.

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