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Market Makers vs. ECNs

Traders Magazine, September 2000

Michael T. Dorsey

In the national discourse on market structure, there is talk that electronic communication networks will replace liquidity providers such as OTC market makers and exchange specialists. We at Knight Trading Group believe that reports of our imminent demise (as well as the downfalls of our fellow OTC market makers) are greatly exaggerated.

ECNs display limit orders and match those limit orders with others existing in their systems. ECNs' main virtue is that they are brokers that never take the other side of a customer limit order. ECNs also provide anonymity and a high degree of control for their subscribers.

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