Archipelago

What Is Archipelago?

Archipelago was an electronic communications network (ECN) that merged with the New York Stock Exchange (NYSE) in 2006 to turn into the NYSE Arca Exchange. ECNs consider automated trading, passive order matching, after-hours trading, and quick order execution.

Archipelago, made in 1996, was one of the main ECNs and an antecedent to the Archipelago Exchange (ArcaEx) that was made in 2001 to work with electronic stock trading for the major U.S. stock exchanges. Soon after the merger with Archipelago, the NYSE turned into a publicly traded company with both new electronic and traditional floor-trading capacities.

Figuring out Archipelago

The electronic NYSE Arca exchange permits stock and options trading and offers one of the largest ECNs in the world. The NYSE Arca exchange is owned by NYSE Euronext and is settled in Chicago.

An electronic communication network (ECN) is a modernized system that naturally matches buy and sell orders for securities in the market. It interfaces major financiers and individual traders so they can trade straightforwardly between themselves without going through a middleman and make it feasible for investors in various geographic areas to rapidly and effectively trade with one another. The U.S. Securities and Exchange Commission (SEC) requires ECNs to register as agent sellers.

Archipelago was one of the primary ECNs to be approved by the Securities and Exchange Commission (SEC) to open a national stock exchange. In its beginning phases the company — alongside its primary rivals in the ECN space, Instinet and Island — showed share price changes, the size of the bid and the ask, and gave prompt trade executions.

Archipelago and Traditional Exchange Partnerships

In March 2000, Archipelago collaborated with the Pacific Exchange (PCX) to form the Archipelago Securities Exchange, trading stocks listed on the NYSE, the NASDAQ, and the American Stock Exchange (AMEX). The exchange immediately acquired prevalence with institutional trading firms for its execution speed and the namelessness given by the electronic trading platform, before converging with the NYSE to form the NYSE Arca Exchange.

By 2005, Archipelago had become one of the NYSE's primary rivals, offering quick electronic executions through the Archipelago Exchange versus the traditional open outcry system of the NYSE. Alluded to as ArcaEx, the exchange was prevailing upon day traders and institutional traders by offering fast and practical electronic transactions while traders on the floor of the NYSE accumulated around experts' posts yelling buy and sell orders.

Prior to the acquisition of Archipelago, 90 percent of trade executions on NYSE were placed physically into the system. In the span of seven days of the NYSE's acquisition of Archipelago, the NASDAQ acquired the ECN's greatest rival, Instinet.

The NYSE and NYSE Arca

Notwithstanding worries that the NYSE's acquisition of Archipelago would mean certain doom for traditional floor trading, the open outcry auction system continues, gaining practical experience in the trading of large blue-chip companies, numerous with roots dating back a century or more. The NYSE Arca, then again, has capitalized on the developing ubiquity of exchange traded products (ETPs), a category that incorporates exchange traded funds (ETFs), exchange traded notes (ETNs), and exchange traded vehicles (ETVs). With trading in north of 8,000 ETPs, as of March 2016, the NYSE Arca has advanced into the most active exchange in the world, as estimated by listed issuers and trading volume.

Starting around 2020, NYSE Arca was the world's leading ETF exchange in terms of volume and postings. The exchange orders 19.5% of the ETF market share in the United States and records more than 2,238 individual ETFs. NYSE Arca listed ETFs have generally $3.8 trillion in assets under management (AUM).

Similar as other electronic communications networks (ECN), NYSE Arca carries out a liquidity fee/rebate program to further develop overall market depth. For instance, market producers are charged a fee to eliminate liquidity and furnished with a rebate for adding it. Fees and rebates normally range somewhere in the range of $0.02 and $0.03 per share.

Features

• Archipelago was one of the primary ECNs for electronic stock trading in the U.S., sent off in 1996.
• An electronic communication network (ECN) is a digital system that matches buyers and sellers hoping to trade securities in the financial markets.
• In 2006, Archipelago merged with the New York Stock Exchange to form NYSE Arca, which is today one of the world's largest stock exchanges.