Most of these advantages are specifically relevant for retail investors that happen to be much better with Crypto exchanges when compared with traditional exchanges. So traditional exchanges should start to move or face the fate in the dinosaurs. It will not be long until starting to view we have and ideas of crypto exchanges deployed for stock, bond, currency and trading options. This doesn’t mean stocks must become blockchain-based tokens, but rather that tokens enables you to represent stockholdings pretty easily and transacted blockchain style.

1. Fractional purchasing

With crypto exchanges, you can get whatever fraction you want of any asset. Therefore if you want to invest $523 in bitcoins that can be done this. You don’t have to obtain a whole bitcoin, you can get any fraction than it (e.g. 0.003 BTC). This enables small investors more flexibility and also causes it to be simpler to generate balanced portfolios with any amount.

With traditional exchanges, you have to buy no less than one stock and you will buy only whole numbers. This can ‘t be a difficulty for big-time traders but retail investors will find it too lumpy. A Google or Amazon stock is trading for north of $1.000 so that it is a large commitment, not to talk about the $325k Berkshire Hathaway stock.

There is really no reason at all for this except the truth that once stock certificates were paper documents that couldn’t be slashed into smaller pieces. Nowadays fractional trading and investing is perfectly feasible and is implemented quickly through tokenization of stocks.

2. 24×7 trading

With crypto exchanges, you can purchase and then sell on 24×7. Obviously, exceptionally web sites are down or perhaps the blockchain is very backed-up. This is convenient for retail investors that are usually working or busy in the event the information mill open. Additionally, it levels the playing field when it comes to being able to answer news such as the China ICO crackdown.

With traditional exchanges, you might be limited by the “market hours”. Similar to your neighborhood physical store vs. Amazon. Naturally, institutional traders get all kind of “pre-market” and “post-market” trading that isn’t offered to retail investors.

Again, “market hours” designed a lots of sense when real people were trading in the pit. Nowadays there is absolutely no reason never to allow 24h trading since the “pre and post” markets show. Naturally, if some are allowed from the “pre and post” they’ve got an unfair edge on everyone else and might wish to maintain their own rules.

3. Instant Settling

With crypto exchanges, you can purchase and sell instantly. The exchange takes choose to instantly settle according to their custody of crypto assets and formalize the change you’d like the blockchain allows. This is natural, when you hit the button there is a asset.

With traditional exchanges, your order is processed and then there is often a long settling process (currently T+2 or 48 hrs from close). While there is normally no problem with, it enables High Frequency Traders advantages over us common mortals.

There are 2 problems to allow instant settling with current stock market infrastructure. First, you will find there’s technology problem. Even though the blockchain allows instant settling, previous technologies require through a convoluted procedure for checking and rechecking. Second, the multilayered value chain which made sense inside the old world takes necessary more time compared to the direct label of crypto exchanges.

4. Transparent order-books

Crypto order books are totally transparent in several exchanges like Kraken or Poloniex. You can view the depth with the buy and sell side of every market in every in the assets you happen to be trading. Which means you can recognize how the market industry looks and what will happen in case you convey a large order.

In traditional exchanges, you don’t see order books as a retail investor which are proprietary for the exchange and could be sold as a value added. The matching of order books is an important advantage for market makers. This can be the main purpose with the so-called “dark pools” that investment banks are coming up with.

Transparent order books would have been a results of competition and consumer expectations for the one for reds. But they also need modern technology infrastructure that could cope with the raised information volume.

5. Modern and secure interfaces

Crypto interfaces are viewed from the net and mobile perspective, with security like a key feature. They are light clients in browsers or smartphones. They could be accessed easily from the oral appliance use state of the art technology. This allows simplicity, speed and intuitive customer experience.

The standard interfaces I have experienced remain full applications inside a desktop setting with clunky interfaces and long load time. This probably is related to legacy applications that must be updated but need to be secured and evolved slowly.

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

6. Direct-to-investor

Crypto exchanges deal directly with retail investors and still have hardly any other players from the value chain beyond themselves. When you find yourself with an exchange you are directly conversing with your custodian, your marketplace, your agent, etc… This may cause sense in a world where decentralized trust cuts down on the needs for intermediaries. There are several exchange mechanisms like Shapeshift which might be more direct and hook you up to the other side in the trade.

Traditional exchanges have a big list of players. They have brokers, that connect to the exchange for you. They have got custodians, taking proper your assets. This made sense in a world without blockchain in which decentralized trust was complex. Now exchanges grapple with all the question of going direct and bypassing their partners, just like consumer goods companies when eCommerce was starting.

Within a Blockchain-enabled world there exists decentralized trust thereby you don’t need a lot of actors to produce trades secure. This will 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 exists nowhere to cover up, so it is very obvious what is the exchange charging. Crypto fees range from 0,10-0,30% towards the very expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers are hard to comprehend as they routinely have numerous components. They may be low for larger trades, but can typically figure to $1 to $7 per trade which is often pricey for many transactions.

Fee schedules are a result of cost and competition. With blockchain type infrastructure cost will disappear very significantly. Concurrently, 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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Overall, it appears as though a well used shift from your previous model wonderful its legacy limitations for the model which a new technology enables. Due to the already digitized nature of exchanges and stocks, bonds and options don’t be surprised movements to begin fast as well as the switch the signal from be swift. Much more classifieds from the newspaper industry than the slower shift to e-commerce. Regulation can be quite a hurdle, but financial authorities seem open to more potent, fair and quick transaction methods. The exchange that moves quicker often will take in the lunch of competitor exchanges. Much like the likes of Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a new reality to see where did they will get their level to the new gold standard.

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