Electronic communication network (ECN)

ECNs are commonly used in OTC markets to facilitate trades directly between broker-dealers. For instance, treasury futures are traded on futures exchanges like CME, CBOT, and Eurex, while cash treasuries are typically traded through brokers in the secondary market, often supported by ECNs like BrokerTec. Other notable ECNs include EBS and Refinitiv FXall (formerly Reuters FXall), which are two of the largest trading venues for cash FX.

Although ECNs share many similarities with exchanges—such as using s messaging protocols like FIX, enforcing matching rules, managing message rate limits, and offering colocation services—there are a few possible differences:

• Exchanges typically have a central clearing counterparty responsible for handling post-trade settlements, whereas ECN trades are settled directly between the involved counterparties.
• ECNs often don't use a central limit order book (CLOB), though some do offer anonymous matching in order-based markets, functioning much like an exchange.
• ECNs are usually quote-driven, where participants submit bids and offers to set prices, while exchanges are generally order-driven, matching buy and sell orders in a structured manner.