There are no dealer spreads and no payment for order-flow, the system whereby brokers receive fees for directing trades toward certain market makers. Instead, investors themselves make the markets the old-fashioned way. They hook up with someone under a sort of digital buttonwood tree, the Web equivalent of the original shady spot near Wall Street where buyers and sellers traded paper shares of companies long before the giant stock exchanges were built. Brokers are still involved in these transactions, but only to do the paperwork to officially transfer the stock from seller to buyer. Goldman, Sachs and Dow Jones are two of its major backers.
Trade settlement is instantaneous.
Wit will also allow brokers to direct orders through the online system. A Web pioneer, Wit handled the first-ever public IPO conducted over the Internet in 1996 for Spring St. Brewery, and has since garnered attention for several online public offerings to individual investors. Not all companies or individual investors can participate in these online direct stock markets - yet. Although the federal regulatory hurdles have been cleared, and both Washington and most statehouses are comfortable with this practice, some states still do not allow direct digital investing. Most of the illegitimate activities targeted in the recent SEC crackdown on illicit Web trading were simply classic cons transferred to cyberspace.