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4. Most of these advantages are specifically relevant for retail investors that happen to be superior using Crypto exchanges compared to traditional exchanges. So traditional exchanges should start to move or face the fate with the dinosaurs. It will not be long until starting to view the technology and ideas of crypto exchanges deployed for stock, bond, currency and options trading. This does not imply stocks ought to become blockchain-based tokens, but instead that tokens may be used to represent stockholdings pretty easily and transacted blockchain style.
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10. 1. Fractional purchasing
11. With crypto exchanges, you can buy whatever fraction you want associated with a asset. What this means is if you wish to invest $523 in bitcoins that can be done exactly that. You should not obtain a whole bitcoin, you can buy any fraction than it (e.g. 0.003 BTC). This permits small investors more flexibility and in addition makes it much easier to produce balanced portfolios with anywhere.
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13. With traditional exchanges, you must buy no less than one stock and you may purchase only whole numbers. This can 't be an issue for big-time traders but retail investors will find it too lumpy. A Google or Amazon stock is trading for north of $1.000 which makes it a large commitment, not to speak of the $325k Berkshire Hathaway stock.
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15. There is really absolutely no reason for this except the fact that 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.
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17. 2. 24x7 trading
18. With crypto exchanges, you can purchase and then sell 24x7. Needless to say, exceptionally web sites are down or even the blockchain is very backed-up. This really is convenient for retail investors who're usually working or busy once the companies are open. What's more, it levels the stage regarding being able to react to news for example the China ICO crackdown.
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20. With traditional exchanges, you are restricted by the "market hours". Similar to any local physical store vs. Amazon. Naturally, institutional traders get all sort of "pre-market" and "post-market" trading is not available to retail investors.
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22. Again, "market hours" developed a lot of sense when real individuals were trading the pit. Nowadays there's no reason to not allow 24h trading because the "pre and post" markets show. Needless to say, if many are allowed inside the "pre and post" they have an unfair edge over the rest of us and may desire to keep their own rules.
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24. 3. Instant Settling
25. With crypto exchanges, you can buy then sell instantly. The exchange takes want to instantly settle determined by their custody of crypto assets and formalize the modification as soon as the blockchain allows. This is extremely natural, when you hit the button there is an asset.
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27. With traditional exchanges, your order is processed and then there is a long settling process (currently T+2 or 48 hrs from close). To find out normally not an issue with, it allows High Frequency Traders advantages over us common mortals.
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29. There's two problems to permit instant settling with current stock trading game infrastructure. First, you will find there's technology problem. As the blockchain allows instant settling, previous technologies have to go via a convoluted means of checking and rechecking. Second, the multilayered value chain which made sense within the old world takes necessary additional time than the direct model of crypto exchanges.
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31. 4. Transparent order-books
32. Crypto order books are totally transparent in lots of exchanges like Kraken or Poloniex. You can observe the depth in the trade side of every market in every with the assets you are trading. And that means you can discover how the market looks as well as what could happen if you convey a large order.
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34. In traditional exchanges, you do not see order books as being a retail investor that are proprietary on the exchange and is sold being a value added. The matching of order books can be an important advantage for market makers. This can be the main purpose with the so-called "dark pools" that investment banks are creating.
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36. Transparent order books is a consequence of competition and consumer expectations on the the whites. They also need modern technology infrastructure that can handle the raised information volume.
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38. 5. Modern and secure interfaces
39. Crypto interfaces are thought on the internet and mobile perspective, with security as being a key feature. They are light clients in browsers or smartphones. They could be accessed easily on the unit and use cutting edge technology. This enables convenience, speed and intuitive customer experience.
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41. The regular interfaces We've experienced are still full applications within a desktop setting with clunky interfaces and long load times. This probably is related to legacy applications that ought to be updated but have to be secured and evolved slowly.
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43. Evolving completely to another application interface will likely be challenging as it will need agile practices and frameworks that are second-nature for brand new entrants but take courage and conviction from existing incumbents.
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45. 6. Direct-to-investor
46. Crypto exchanges deal directly with retail investors and possess few others players in the value chain beyond themselves. When you're in an exchange you are directly speaking with your custodian, your marketplace, your agent, etc... This may cause sense within a world through which decentralized trust reduces the needs for intermediaries. There are some exchange mechanisms for example Shapeshift which are more direct and merely connect you to the other side in the trade.
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48. Traditional exchanges use a long list of players. They have brokers, that connect to the exchange for you. They have got custodians, who take care of your assets. This made sense inside a world without blockchain through which decentralized trust was complex. Now exchanges grapple together with the question of going direct and bypassing their partners, comparable to consumer goods companies when eCommerce was starting.
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50. In a Blockchain-enabled world there is certainly decentralized trust and therefore its not necessary countless actors to generate trades secure. This may probably take to a progressively leaner value chain model.
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52. 7. Variable and transparent fees
53. Crypto exchanges have transparent and frequently low fees. They're transparent because being direct there's nowhere to hide, so it's very obvious what is the exchange charging. Crypto fees vary from 0,10-0,30% on the expensive but convenient Coinbase with 1,5% to 4% fees.
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55. Fees in traditional brokers are hard to comprehend while they typically have many different components. They are often low for larger trades, but tend to typically amount to $1 to $7 per trade which can be pricey for some transactions.
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57. Fee schedules are caused by cost and competition. With blockchain type infrastructure cost will be reduced very significantly. Simultaneously, increased competition will represent a secular trend of shrinking fees for retail investors with ETF and crypto exchange fees to be the gold standard which others converge.
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61. Overall, it looks like an antique shift in the previous model effortlessly its legacy limitations on the model that a new technology enables. Given the already digitized nature of exchanges and stocks, bonds and options expect movements to get started on fast and the switch to be swift. A lot more like classifieds inside the newspaper industry compared to slower shift to e-commerce. Regulation is usually a hurdle, but financial authorities seem available to far better, fair and quick transaction methods. The exchange that moves quicker can probably eat the lunch of competitor exchanges. Similar to manufacturers like Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a whole new reality and discover how they are likely to take their level towards the new defacto standard.
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