Rapid Advances in Computing and Telecommunication Tech

nologies, particularly the Internet, have profoundly changed the dynamics of financial markets. More people are trading online through the Web instead of using full-service brokerages. According to Jupiter Communications, the $415 billion online brokerage assets in 1998 will grow by more than sevenfold to $3 trillion in 2003 [4]. Investors Combining new technology with established financial market mechanisms. can now trade stocks, access real-time market information, and conduct investment research in ways they could not dream of just a decade ago. However, if we look at the overall process of trading in financial markets (see Figure 1), which includes order entry by investors, order verification and routing by brokerage firms, and, finally, execution and settlement through various markets, online trading has only replaced telephones with the Web and provided a universal interface for individual investors to participate in the financial markets. It has not necessarily improved the overall efficiency level of the market. Beginning several years ago, the U.S. financial markets have been experiencing a profound change that goes far beyond online trading. It is not an exaggerated claim to describe the ongoing development as a fundamental revolution [2]. Recently, we have witnessed the Nasdaq's acquisition of the American Stock Exchange, the phenomenal growth of the Electronic Communications Networks (ECNs), and the introduction of after-hours trading. Looking at all the changes, ECNs have been among the most significant. ECNs are electronic trading systems that can automatically match buy and sell orders without the intermedi