These types of advantages are specially relevant for retail investors that happen to be greater using Crypto exchanges compared to traditional exchanges. So traditional exchanges should begin to move or face the fate in the dinosaurs. Clothing long until we start to determine we now have and concepts of crypto exchanges deployed for stock, bond, currency and trading options. This doesn't mean stocks must become blockchain-based tokens, but that tokens may be used to represent stockholdings pretty easily and transacted blockchain style.
1. Fractional purchasing
With crypto exchanges, you should buy whatever fraction you need associated with a asset. What this means is if you want to invest $523 in bitcoins that you can do this. There's no need to obtain a whole bitcoin, you should buy any fraction than it (e.g. 0.003 BTC). This allows small investors more flexibility and in addition causes it to be much easier to produce balanced portfolios with any amount.
With traditional exchanges, you need to buy at least one stock and you will obtain only whole numbers. This could not 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 rendering it a huge commitment, to not discuss about it the $325k Berkshire Hathaway stock.
There's really absolutely no reason with this except the fact once stock certificates were paper documents that couldn't be slashed into smaller pieces. Nowadays fractional stock investing is perfectly feasible and could be implemented quickly through tokenization of stocks.
2. 24x7 trading
With crypto exchanges, you can get then sell 24x7. Of course, exceptionally web sites are down or even the blockchain is entirely backed-up. This really is convenient for retail investors that are usually working or busy in the event the marketplace is open. In addition, it levels the stage in terms of being able to reply to news for example the China ICO crackdown.
With traditional exchanges, you might be restricted by the "market hours". Just like your local physical store vs. Amazon. Naturally, institutional traders get all type of "pre-market" and "post-market" trading which isn't open to retail investors.
Again, "market hours" designed a lots of sense when real citizens were buying and selling the pit. Nowadays there is no reason to never allow 24h trading because the "pre and post" markets show. Naturally, if some are allowed inside the "pre and post" they've got an unfair advantage over ordinary people and may need to keep their own rules.
3. Instant Settling
With crypto exchanges, you should buy and sell instantly. The exchange takes want to instantly settle depending on their custody of crypto assets and formalize the modification as fast as the blockchain allows. This is very natural, as soon as you hit the button there is a asset.
With traditional exchanges, your order is processed its keep is often a long settling process (currently T+2 or 2 days from close). As there is normally no problem with, it helps 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 need to go by way of a convoluted means of checking and rechecking. Second, the multilayered value chain which made sense in the " old world " takes necessary additional time as opposed to direct label of crypto exchanges.
4. Transparent order-books
Crypto order books are totally transparent in many exchanges like Kraken or Poloniex. You can observe the depth in the trade side of each one market in every in the assets you're trading. And that means you can understand how the market industry looks along with what may happen if you place a large order.
In traditional exchanges, you don't see order books like a retail investor that are proprietary to the exchange and could be sold being a useful. The matching of order books is usually an important advantage for market makers. Here is the main objective of the so-called "dark pools" that investment banks have formulated.
Transparent order books would have been a reaction of competition and consumer expectations for the the whites. In addition, they need modern technology infrastructure that may manage the increased information volume.
5. Modern and secure interfaces
Crypto interfaces are viewed as from the web and mobile perspective, with security as being a key feature. These are light clients in browsers or smartphones. They could be accessed easily from any unit and use cutting edge technology. This enables ease of use, speed and intuitive customer experience.
The standard interfaces I have experienced continue to be full applications inside a desktop setting with clunky interfaces and long load times. This probably is related to legacy applications that should be updated but have to be secured and evolved slowly.
Evolving to a different application interface will likely be challenging since it requires 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 also have experienced before players in the value chain beyond themselves. When you are within an exchange you might be directly speaking with your custodian, your marketplace, your agent, etc... As a result sense inside a world by which decentralized trust decreases the needs for intermediaries. There are several exchange mechanisms like Shapeshift that are even more direct and just hook you up to another side with the trade.
Traditional exchanges have a very big list of players. They have got brokers, that connect to the exchange in your stead. They've got custodians, who take proper care of your assets. This made sense in a world without blockchain by which decentralized trust was complex. Now exchanges grapple with all the question of going direct and bypassing their partners, similar to consumer goods companies when eCommerce was starting.
In a Blockchain-enabled world there is certainly decentralized trust thereby you don't need numerous actors to create trades secure. This may probably take to a progressively leaner value chain model.
7. Variable and transparent fees
Crypto exchanges have transparent and frequently low fees. They're transparent because being direct there's nowhere to cover, so it will be very obvious what is the exchange charging. Crypto fees range between 0,10-0,30% to the expensive but convenient Coinbase with 1,5% to 4% fees.
Fees in traditional brokers are hard to know because they routinely have numerous components. They are often low for bigger trades, but can typically figure to $1 to $7 per trade which can be pricey for a lot of transactions.
Fee schedules are a result of cost and competition. With blockchain type infrastructure cost will appear reduced very significantly. Concurrently, 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 like an antique shift in the previous model with all its legacy limitations towards the model that the new technology enables. Because of the already digitized nature of exchanges and stocks, bonds and options we can expect movements to start fast and the switch to be swift. More like classifieds inside the newspaper industry compared to the slower shift to e-commerce. Regulation can be a hurdle, but financial authorities seem offered to far better, fair and quick transaction methods. The exchange that moves quicker often will consume the lunch of competitor exchanges. Similar to brands like Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a new reality to see how they will place their level for the new gold standard.
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