The wider the spread, the more room market makers have to profit from individual investors by selling high and buying low. In the aftermath of this collusion case, major Wall Street houses have ponied up over a billion dollars in fines. In other words, Nasdaq is looking to protect the interests of its own members at the same time it tries to make the market more competitive. These networks are essentially electronic limit order books where buyers and sellers meet to negotiate trades among themselves independent of any middleman market maker. ECNs claim about a quarter of the overall trading in Nasdaq-listed shares.
Market makers can trade through the ECNs.
In some cases, they even post more competitive prices to the ECNs than the ones they display directly through SelectNet, Nasdaq's principal electronic order routing system where market makers and other order-entry firms negotiate securities transactions. In practice, then, a market maker's best quote may be his own or a customer's limit order, but it must now be posted directly to the SelectNet system or to an ECN that disseminates it to the broad market via SelectNet. As a result, the main Nasdaq quote montage already integrates limit orders from individual and institutional investors when those orders are the best available overall. This sounds confusing, and it is. Such overlapping yet competitive systems create opportunities for all active players to game the trading one way or another.