How are trades executed in the fourth market?

In the fourth market, trades are executed primarily through electronic communication networks (ECNs). This market segment facilitates direct trading between institutions, such as mutual funds or hedge funds, without the need for intermediaries. ECNs enable these parties to match buy and sell orders anonymously and efficiently, contributing to lower transaction costs and increased liquidity.

The reliance on ECNs in the fourth market distinguishes it from other markets, where traditional brokers or market makers play a more significant role. In this context, ECNs allow for automated execution of trades, enhancing speed and the ability to handle large blocks of shares without affecting market prices significantly. This is particularly valuable for institutional traders who seek to minimize market impact and achieve best execution for large transactions.