ECN

ECN (standing for "electronic communications networks") are automated order matching systems. If a day trading request to buy or sell a stock or security is sent to any ECN, the ECN attempts to match the order to an opposite order (i.e a sell if its a buy, or a buy if its a sell) of the same size.

Typically, for a liquid stock, an ECN can manage this in a second or less. Until recently, only the largest banking and day trading institutions could day trade using ECNs.The major advantage this gave them over you and I was that this allowed them to buy and sell stocks outside the regular stock market hours (when most market-moving earnings announcements took place).

You can probably see how unfair this was for the smaller day trader, who had to wait for the market to open in order to place a trade. This state of affairs ended a few years ago, when an ECN called Island started taking orders form the public. The growth in day trading via ECNs since then has been very rapid, effectively stealing business away from the more usual brokerage methods. Due to execution speed and transparency, ECNs are extremely useful when day trading, as it is far less likely that you will suffer a 'bad fill'. Read this article on day trading for more information.