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Most of these advantages are specially relevant for retail investors that are much better served by Crypto exchanges in comparison with traditional exchanges. So traditional exchanges should learn to move or face the fate from the dinosaurs. It won’t be long until starting to determine we have and concepts of crypto exchanges deployed for stock, bond, currency and options trading. This does not imply stocks need to become blockchain-based tokens, but rather 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. Therefore in order to invest $523 in bitcoins that you can do that. You should not obtain a whole bitcoin, you can purchase any fraction than it (e.g. 0.003 BTC). This allows small investors more flexibility and in addition helps it be a lot easier to generate balanced portfolios with anywhere.

With traditional exchanges, you need to buy at least one stock and you will buy only whole numbers. This can ‘t be a problem 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, never to bring the $325k Berkshire Hathaway stock.

There is certainly really no reason at all just for 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 purchase and then sell on 24×7. Of course, exceptionally web sites are down or the blockchain is entirely backed-up. This is very convenient for retail investors who will be usually working or busy when the market is open. It also levels the game in terms of being able to react to news like the China ICO crackdown.

With traditional exchanges, you are restricted by the “market hours”. Comparable to the local physical store vs. Amazon. Obviously, institutional traders get all sort of “pre-market” and “post-market” trading that isn’t accessible to retail investors.

Again, “market hours” made a lots of sense when real everyone was trading in the pit. Nowadays there’s no reason to never allow 24h trading because “pre and post” markets show. Naturally, if some are allowed inside the “pre and post” they’ve got an unfair edge on ordinary people and may desire to keep their own rules.

3. Instant Settling

With crypto exchanges, you can buy then sell instantly. The exchange takes want to instantly settle depending on their custody of crypto assets and formalize the progres as quickly as the blockchain allows. This is extremely natural, whenever you hit the button there is a asset.

With traditional exchanges, the transaction is processed its keep is a long settling process (currently T+2 or 48 hrs from close). Nevertheless there is normally not an issue with, it enables High Frequency Traders advantages over us common mortals.

There are 2 problems to allow for instant settling with current stock trading game infrastructure. First, you will find there’s technology problem. While the blockchain allows instant settling, previous technologies require via a convoluted process of checking and rechecking. Second, the multilayered value chain which made sense within the ” old world ” takes necessary more time than the direct style of crypto exchanges.

4. Transparent order-books

Crypto order books are totally transparent in lots of exchanges like Kraken or Poloniex. You can view the depth in the trade side of every market in every from the assets you’re trading. Which means you can understand how the marketplace looks and just what could happen if you place a large order.

In traditional exchanges, you do not see order books like a retail investor which can be proprietary for the exchange and is sold like a value added. The matching of order books is definitely an important advantage for market makers. This is the main objective from the so-called “dark pools” that investment banks are creating.

Transparent order books might be a results of competition and consumer expectations about the one side. In addition, they need better technology infrastructure that will handle the improved information volume.

5. Modern and secure interfaces

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

The standard interfaces We’ve experienced continue to be full applications in a desktop setting with clunky interfaces and long loading time. This probably has to do with legacy applications that must be updated but must be secured and evolved slowly.

Evolving to a different application interface is going to be challenging as it will demand agile practices and frameworks that are 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 also have few other players from the value chain beyond themselves. When you find yourself at an exchange you are directly talking to your custodian, your marketplace, your agent, etc… This makes sense in a world in which decentralized trust reduces the needs for intermediaries. There are several exchange mechanisms including Shapeshift which might be even more direct and just connect you to the other side with the trade.

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

In the Blockchain-enabled world there’s decentralized trust and so you don’t need so many actors to make trades secure. This will probably choose to use 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 is nowhere to cover up, so it is very obvious what is the exchange charging. Crypto fees range from 0,10-0,30% towards the expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers are hard to be aware of because they most often have a number of components. They are often low for bigger trades, but sometimes typically figure to $1 to $7 per trade which can be pricey for a few transactions.

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 defacto standard this agreement others converge.

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Overall, it appears as if a vintage shift in the previous model effortlessly its legacy limitations to the model that the new technology enables. Because of the already digitized nature of exchanges and stocks, bonds and options expect movements to get started on fast and the change to be swift. More like classifieds from the newspaper industry than the slower shift to e-commerce. Regulation is usually a hurdle, but financial authorities seem ready to accept more effective, fair and quick transaction methods. The exchange that moves quicker often will eat the lunch of competitor exchanges. Much like brands like Schibsted launched digital classifieds across Europe and dominated the category. So traditional exchanges should face a fresh reality and discover that they will certainly get their level for the new defacto standard.

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