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Archipelago

Archipelago is an electronic communications network (ECN) that joined the New York Stock Exchange (NYSE) in 2006 to form the NYSE Arca Exchange. EVNs allow for automated trading, passive order matching, after-hours trading, and immediate order execution. One of the first ECNs, Archipelago, was established in 1996 and served as a model for the Archipelago Exchange (ArcaEx), which was established in 2001 to support electronic stock trading for the main U.S. stock exchanges. The NYSE became a publicly traded business with both new electronic and conventional floor-trading capabilities soon after the merger with Archipelago.


Insight into an Archipelago
NYSE Arca, one of the world's largest electronic communication networks (ECNs), facilitates trading in stocks and options. NYSE Arca, part of the NYSE Euronext family, is headquartered in Chicago.

Why using ECN? Simple. If you want to purchase or sell stocks on the market, but don't have time to do it manually, an electronic communication network (ECN) can do it for you instantly. Trading between investors in different parts of the world is facilitated by the network's linking of big brokerages and independent traders, eliminating the need for an intermediary. Electronic communication networks (ECNs) are mandated to become registered broker-dealers with the U.S. Securities and Exchange Commission (SEC).

The Securities and Exchange Commission (SEC) granted Archipelago one of the earliest licenses to operate an electronic communications network (ECN) stock exchange. 


Archipelago and Traditional Exchanges
For the purpose of trading stocks listed on the New York Stock Exchange, the National Association of Securities Dealers, and the American Stock Exchange, Archipelago collaborated with the Pacific Exchange (PCX) in March 2000 to create the Archipelago Securities Exchange (AMEX). Before combining with the NYSE to become the NYSE Arca Exchange, the exchange was very popular with institutional trading businesses due to the speed of its execution and the anonymity of its electronic trading platform.

Unlike the NYSE's conventional open outcry method, Archipelago's Archipelago Exchange allows for immediate electronic executions, making it a major competitor of the NYSE by 2005. While dealers on the NYSE floor clustered around specialists' posts yelling buy and sell orders, a new exchange known as ArcaEx was gaining popularity among day traders and institutional traders by providing rapid and inexpensive electronic transactions.

Ninety percent of NYSE trade executions were entered manually into the system before the purchase of Archipelago. The NYSE's purchase of Archipelago was followed by the NASDAQ's purchase of the ECN's main rival, Instinet, within a week.

New York Stock Exchange and the New York Stock Exchange Arca
Although many people worried that the NYSE's purchase of Archipelago would mean the death of traditional floor trading, the open outcry auction system remains in operation, with a focus on the trading of huge blue-chip businesses, many of which have been around for a century or more. Meanwhile, the NYSE Arca has taken advantage of the rising demand for exchange traded products (ETPs) such ETFs, ETNs, and ETVs, all of which fall under the umbrella term "exchange traded products" (ETVs). As of March 2016, the NYSE Arca had become the busiest exchange in the world in terms of listed issuers and trading volume, thanks to the trading of over 8,000 exchange-traded products (ETPs).

By 2020, NYSE Arca had become the largest ETF exchange globally. There are more than two thousand ETFs listed on the exchange, giving it roughly 20% of the U.S. ETF market.

NYSE Arca, like other electronic communication networks (ECNs),  use liquidity fees and rebates to increase market depth. For instance, market makers incur a cost if they drain liquidity but receive a refund whenever they replenish it. 



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