These types of advantages are specially relevant for retail investors which are far better with Crypto exchanges in comparison to traditional exchanges. So traditional exchanges should will move or face the fate with the dinosaurs. It certainly won’t be long until we start by getting to determine we now have and concepts of crypto exchanges deployed for stock, bond, currency and trading options. This does not imply stocks need to become blockchain-based tokens, but instead that tokens enable you to represent stockholdings pretty easily and transacted blockchain style.

1. Fractional purchasing

With crypto exchanges, you should buy whatever fraction you would like from a asset. This implies if you need to invest $523 in bitcoins that you can do that. You don’t need to get a whole bitcoin, you can get any fraction of computer (e.g. 0.003 BTC). This gives small investors more flexibility and in addition helps it be easier to produce balanced portfolios with anywhere.

With traditional exchanges, you need to buy no less than one stock and you can purchase only whole numbers. This may not be a problem for big-time traders but retail investors might find it too lumpy. A Google or Amazon stock is trading for north of $1.000 which makes it a big commitment, not to talk about the $325k Berkshire Hathaway stock.

There is certainly really pointless because of this except the reality that once stock certificates were paper documents that couldn’t be cut into smaller pieces. Nowadays fractional trading is perfectly feasible and is implemented quickly through tokenization of stocks.

2. 24×7 trading

With crypto exchanges, you can buy and sell 24×7. Naturally, exceptionally web sites are down or perhaps the blockchain is entirely backed-up. This is very convenient for retail investors who will be usually working or busy if the market is open. It also levels the game in terms of having the ability to respond to news like the China ICO crackdown.

With traditional exchanges, you happen to be restricted to the “market hours”. Similar to your local physical store vs. Amazon. Obviously, institutional traders get all kind of “pre-market” and “post-market” trading is not offered to retail investors.

Again, “market hours” developed a great deal of sense when real citizens were exchanging the pit. Nowadays there is absolutely no reason never to allow 24h trading because the “pre and post” markets show. Naturally, if many are allowed from the “pre and post” they’ve an unfair edge over the rest of us and might wish to keep their own rules.

3. Instant Settling

With crypto exchanges, you can purchase and sell instantly. The exchange takes care to instantly settle based on their custody of crypto assets and formalize the alteration you’d like the blockchain allows. This is natural, as soon as you hit the button there is an asset.

With traditional exchanges, your order is processed and then there is really a long settling process (currently T+2 or 2 days from close). Nevertheless there is normally not an issue with, it allows High Frequency Traders advantages over us common mortals.

There are 2 problems to allow for instant settling with current currency markets infrastructure. First, there’s a technology problem. Whilst the blockchain allows instant settling, previous technologies will need to go through a convoluted procedure for checking and rechecking. Second, the multilayered value chain which made sense in the yesteryear takes necessary more time compared to the direct model of crypto exchanges.

4. Transparent order-books

Crypto order books are totally transparent in numerous exchanges like Kraken or Poloniex. You can observe the depth from the trade side of each market in every from the assets you are trading. Which means you can recognize how the market industry looks and what may happen in the event you place a large order.

In traditional exchanges, that you do not see order books like a retail investor that are proprietary on the exchange and can be sold being a value added. The matching of order books is usually an important advantage for market makers. Here is the main objective in the so-called “dark pools” that investment banks have formulated.

Transparent order books might be a reaction of competition and consumer expectations on the the whites. But they also need better technology infrastructure that could cope with the increased information volume.

5. Modern and secure interfaces

Crypto interfaces are viewed as on the internet and mobile perspective, with security like a key feature. These are light clients in browsers or smartphones. They are often accessed easily through the device and use cutting edge technology. This permits simplicity, speed and intuitive customer experience.

The traditional interfaces We have experienced continue to be full applications in a desktop setting with clunky interfaces and long load times. This probably is because of legacy applications that ought to be updated but need to be secured and evolved slowly.

Evolving to an alternative application interface will be challenging as it will require agile practices and frameworks which are second-nature for brand new entrants but take courage and conviction from existing incumbents.

6. Direct-to-investor

Crypto exchanges deal directly with retail investors and have few others players in the value chain beyond themselves. When you’re at an exchange you’re directly conversing with your custodian, your marketplace, your agent, etc… This will make sense in a world where decentralized trust cuts down on needs for intermediaries. There are several exchange mechanisms including Shapeshift which can be much more direct and simply hook you up to another side from the trade.

Traditional exchanges have a very large list of players. They have brokers, that interact with the exchange in your stead. They have custodians, who take care of your assets. This made sense in the world without blockchain by which decentralized trust was complex. Now exchanges grapple using the question of going direct and bypassing their partners, just like consumer goods companies when eCommerce was starting.

In a Blockchain-enabled world there is decentralized trust and thus you don’t need countless actors to generate trades secure. This may probably decide to use a progressively leaner value chain model.

7. Variable and transparent fees

Crypto exchanges have transparent and frequently low fees. They may be transparent because being direct there exists nowhere to disguise, so it is very obvious exactly what is the exchange charging. Crypto fees range from 0,10-0,30% on the very expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers are hard to know while they most often have numerous components. They are often low for bigger trades, but sometimes typically total $1 to $7 per trade which can be pricey for many transactions.

Fee schedules are caused by cost and competition. With blockchain type infrastructure cost will appear reduced very significantly. As well, increased competition will represent a secular trend of shrinking fees for retail investors with ETF and crypto exchange fees being the defacto standard that others converge.

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Overall, it appears as though a well used shift from your previous model with all its legacy limitations towards the model that a new technology enables. Given the already digitized nature of exchanges and stocks, bonds and options we can expect movements to start out fast and the plunge to be swift. More like classifieds in the newspaper industry compared to the slower shift to e-commerce. Regulation could be a hurdle, but financial authorities seem available to more potent, fair and quick transaction methods. The exchange that moves quicker can probably eat the lunch of competitor exchanges. Just like the likes of Schibsted launched digital classifieds across Europe and dominated the category. So traditional exchanges should face a brand new reality and see that they are going to place their level on the new gold standard.

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