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While these issues are being addressed, the wealthy and mighty investors and institutions have been using another way to trade stocks after the regular market hours for years: ECNs. ECNs are Electronic Communications Networks that have allowed the big traders to come together to trade shares in large volumes. They are regulated and perfectly legal, allowing buyers and sellers to directly do business with each other, but for years they have been off limits to the average investors. There are about 10 ECNs registered in the US (more are planned to go online) with participants ranging from big investors to fund managers using special terminals to watch for or offer their own ask and bid prices and enter into transactions. ECNs operate independently from one another. Prices on one ECN may differ from those of other, and the trading hours vary from one to another. The most famous of all ECNs is the Instinet (owned by Reuters) but others such as Island and Bloomberg are also making names for themselves. When you hear after-hours trading, ECNs are where it happens.

The world of after-hours trading has finally begun to open up to the average traders. Many brokers, under pressure from their customers, have entered into agreements with an ECN to allow regular traders to take advantage of after-hours trading, albeit within a restricted time limit. Some allow traders to place orders for up to 3 hours after the market close and prior to the market open. There may also be other restrictions on the number of shares, type of orders, and order specifications. For example, in some cases only multiples of 100-share orders (known as round lots) are accepted. For the most part, trading after-hours is the same as during market hours, so long as you recognize that in most cases your broker is only being supplied prices from one ECN, you are on a different and isolated system, and the volumes are usually low, which means high spreads. …