When in 1997 the London Stock exchange system changed from the traditional Stock Exchange Automated Quotations system (SEAQ) to the Stock Exchange Electronic Trading System (SETS) for the FTSE100 for the beginning and later for the 200 with the biggest liquidity. It was ineluctable one comparison between the new system and the old one, which although it continued to exist it was surely displaced. So what happened was to find to which sectors was each system better than the other. The electronic market had lower prices for the shares, because some factors of the costs for the consumer we saw above don’t exist.
These factors are the distribution costs because there is no need for ‘delivery’ of the shares since they are traded through internet. The search cost for the electronic market is also lower because the consumer doesn’t have to communicate with agent or other market makers in order to complete the transaction he wants to make. He simply watches his monitor, sees what exist in the market and selects what he thinks is better for him. So all intermediaries between buyers and sellers are eliminated and the transaction costs are also eliminated.
Furthermore electronic market are also much faster than the traditional market because there is the advantage of choice between some prices of shares and there is no waiting in order to find the buyer or the seller who will want to meet the demands of the consumer. On the other hand the traditional stock market is less complex than the new system because the consumer asks from the agent or the market maker to buy or sell his or her shares for a price and he does not have to choose between different prices and quantities which will make him have to compute which is the best choice for him/
Also with the traditional market there is no privacy risk as there is in the electronic one. This happens because there is no way the hackers can find any elements about the consumer and through them manage to harm him economically or spoil his reputation. So this makes the transactions from the traditional market really safe. Lastly the traditional market is costless compared to the electronic one. This happens because in the electronic market there are some extra costs. These costs are fixed-assets costs for using the electronic platform and transaction costs which are paid to the firm that operates the electronic market.
The two above costs do not exist in the traditional market because of the absence of electronic platform and so electronic market. From all the above we have seen that the Stock Exchange Electronic Trading System (SETS) is a new system of trading through the stock market. But this system is not yet ready enough in order to replace the Stock Exchange Automated Quotations system (SEAQ) because it is not yet big enough, safe enough and manageable enough to expand to all shares.