Look at the Time and Sales on the ticker below. See how the bid and ask are $16.16 x $16.20 but orders are executing over $8 higher? Allow me to explain.

The orders going through at a weird premium are actually previously executed orders that had not yet hit the tape. They come from a computerized system called the Electronic Communication Network (“ECN” for short) and were most likely triggered earlier in the trading session (or most likely pre-market) and are finally being recorded. As a trader, seeing these go through can be extremely frustrating, not only because they throw off your Time and Sales but also because of how they appear to manipulate your charts.

Yuck.

 

You could basically think of the Electronic Communication Network as a higher-priced market maker that offers more privacy, anonymity and the capability to trade outside of market hours. They also have a tendency to litter your charts with more wicks than a Yankee Candle store. Alas, belated ECN orders are a completely normal occurrence, so as long as you are aware of their existence you should be able to look past them before long.