ECNs, the Next Wave

Concerned that exchange consolidation could raise your trading costs? Don't be. Another wave of electronic communication networks is popping up to challenge the big boys, and their early success suggests that pricing power in the stock trading business is a thing of the past.

With their low prices and rising volume, these electronic platforms are emerging as a new threat to the public exchanges -- which is ironic considering that both the NYSE(NYX Quote) and Nasdaq(NDAQ Quote) swallowed ECNs to achieve their current scale. Buzz about new networks started to circulate in securities' circles last week, as traders looked for ways to protect themselves in case the established exchanges tried to charge more for their services.

The new ECNs leverage several advantages, the main one being the virtually nonexistent barriers to entry in the business they are pursuing. New electronic platforms are easy to start up and, despite their relative obscurity, can quickly become a viable alternative in this elastic market. ...