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A lot of DMM's other businesses are also seediness arbitrage. The FX exchange, for example, is a bucket shop. (This is a shorthand criticism, but since many H

A lot of DMM's other businesses are also seediness arbitrage. The FX exchange, for example, is a bucket shop. (This is a shorthand criticism, but since many HNers might not know it already: pretend you have a country where gambling is mostly illegal. Wagering on the roll of a die is illegal, but people really want to wager, so, you give them "investment" options like "Is the yen going to trade up against the dollar?" While you swear blind that this is investing and that the proverbial Mrs. Watanabe is making informed investment decisions after deeply analyzing the latest market trends, Mrs. Watanabe is actually just depositing yen with you and withdrawing less yen later. She doesn't actually own dollars at any point; she is just "trading" with you. You might not even own dollars at any point. The only purpose of the exchange rate is to be a source of legal random numbers, since a die or deck of cards would be a source of illegal random numbers.) I haven't used DMM's FX offering but out of morbid curiosity I looked at a Bitcoin exchange which is widely reported to have copied it. It was like Zynga had made a pachinko game with slightly more numbers and less chesty mermaids. There was even a "bloop" sound effect when other people's trades went through.

kloncks 9y ago
Just out of curiosity, what's the Bitcoin exchange you reference?
- patio11 9y ago
  You can satisfy your curiosity trivially by looking for cross-currency Bitcoin volume stats and looking for the JPY volume. This will avoid me having made directly critical remarks of a Tokyo startup; that is, for a few reasons, something I am careful about doing.
  - 101km 9y ago
    Apropos of nothing one could look up exchanges ordered by Bitcoin USD volume here: https://www.cryptocompare.com/coins/btc/analysis/USD https://www.cryptocompare.com/coins/btc/analysis/USD
    - unkown-unknowns 9y ago
      Hey look at this video I happened to find which has nothing to do with what has been said by others ITT: https://youtu.be/ODhv4VoMssk https://youtu.be/ODhv4VoMssk
      - Danieru 9y ago
        Also not on topic, but just an hour ago on prime time Japanese TV there was a Bitcoin ad. It appears some Tokyo based btc exchange is generous enough to run ads for the good will of informing regular people of how btc is the future of money.
  - modeless 9y ago
    I am interested to know the reasons why you avoid making directly critical remarks of Tokyo startups.
    - patio11 9y ago
      Some combination of "I am an optimistic guy and like seeing the good in everyone", "This is, like Silicon Valley, a very small town where everyone knows everyone and where making friends is higher expected value than making enemies", "There exist people / organizations I care about which gain or lose karma in proportion to myself and I feel responsibility to not damage their interests", and "I can be trivially deported."
will_brown 9y ago
>She doesn't actually own dollars at any point; she is just "trading" with you. How is that different than trading oil; gold or public stock? If you have ever traded any of those, I'd be willing to wager or invest that if you have, you never took possession of and never really owned barrels of oil; gold bars or even actual stock certificates. You are most likely to have actually owned stock, but when you get into the real nitty gritty of litigation, you would be very surprised (or not, but many would) how stock trading and ownership actually work.
- cm2187 9y ago
  You usually trade futures on commodities, not the commodities themselves. Unless you let it expires and the other side chooses a physical settlement! On stock, you actually own the stock, through your broker.
  - will_brown 9y ago
    >On stock, you actually own the stock, through your broker. I am fairly certain nowadays Cede & Company owns 100% of all the stock in all US markets (NASDAQ, NYSE, etc...). But if you believe you own stock that is exactly the type of confusion and uncertainty the markets themselves want the public to believe, at least according to the litigation I am familiar with, but don't take my word, familiarize yourself with the Depository Trust Company (DTC) and Cede and come to your own conclusions about stock ownership.
    - barrkel 9y ago
      You're factually correct about physical tokens, but it's not what the system is built on - that's contracts.
      - will_brown 9y ago
        I'm not sure what you mean by physical tokens, but the rest sounds about right. And they can downvote me all they want, as you say I am factually correct, because factually Cede literally and technically owns the stock and everyone else just has varying degrees of contractual rights, but most importantly in no way could that lead to physical possession or even technical ownership of the stock from Cede. And I will not even go down the rabbit hole of contractual rights, but obviously includes legitimate ideas of economic interest and voting rights, but as the comment above noted about brokers, that is were things get very interesting, because then often times people don't even own contractual rights, or alternatively many party's simultaneously have varying degrees of contractual rights over the same stock (often times leading to factual inconsistencies and legal impossibilities).
hkmurakami 9y ago
It always amazes me (read: horrifies me) that companies are allowed to plaster FX ads in a deceptively playful and game-like way inside rail cars.
omarforgotpwd 9y ago
The line between gambling and investment gets blurrier the more you think about it. A gamble is really just a really poor / risky investment when you get down to it.
- icelancer 9y ago
  >>A gamble is really just a really poor / risky investment when you get down to it. I counted cards and did other advantage gambling. They were not poor investments or any more risky than other investment ventures (in fact, significantly less risky in some areas I specialized in). But it was never investing. It was always gambling.
  - empath75 9y ago
    I think that the difference between investing and gambling is that in investing there is at least notionally a capitalistic enterprise like a corporation being invested in.
    - icelancer 9y ago
      >>I think that the difference between investing and gambling is that in investing there is at least notionally a capitalistic enterprise like a corporation being invested in. FX/FOREX investments or futures/commodities trading don't count?
      - empath75 9y ago
        I wouldn't considers those investments as much as I'd consider them savings or hedges. If I buy dollars and put them under my mattress, that's not an investment. I'm not sure why it suddenly becomes an investment if I buy euros and do the same thing.
        omarforgotpwd 9y ago
        If you’re holding the dollars because you think they’ll appreciate then it is kind of an investment. Same with euros. Dollars are printed by the federal reserve but if you think about it they’re really securities like any other. It just so happens that this particular security is widely accepted to cover debts in the United States, hence its value. Holding dollars is a bet on the United States. If you thought the US was going to collapse you’d certainly try and hold less dollars.
eterm 9y ago
That's interesting because in the UK spread betting on FX is regulated as gambling. People actually prefer it this way because investments are taxable income but gambling winnings are not (and gambling is of course legal here). So you get almost the opposite situation, where spread betting is dressing itself up as financial trading not to deceive the regulators but as a way for people to invest in a more tax friendly manner.
- dalbasal 9y ago
  It’s all a response to the legal status of investments and gambling (both have different categories with different rules). Whether something is really gambling or investment is kind of philosophical. UK regulators tend to use different terms, specifying subcategories. UK gambling regulations allow anyone old enough to gamble on these exchanges under the same rules as sports betting. If this was classified as financial services, regulations would be a lot stricter. Anyway, UK gambling winnings are not taxable for consumers. The casino’s cut is taxable (15% of gross), which is transferred directly to the customer via spreads whether they win or lose.
0xcde4c3db 9y ago
> The only purpose of the exchange rate is to be a source of legal random numbers, since a die or deck of cards would be a source of illegal random numbers. Incidentally, Illegal lotteries in the US historically used similar sources of numbers. In their case it was apparently more of a way to guarantee that the drawing wasn't fixed than to present it as legal. [1] [1] https://en.wikipedia.org/wiki/Numbers_game#Gameplay https://en.wikipedia.org/wiki/Numbers_game#Gameplay
aerovistae 9y ago
I don't think FX trading is immoral...
eighthnate 9y ago
> so, you give them "investment" options like "Is the yen going to trade up against the dollar?" Even worse( or better depending on your perspective ), these "investments" allow you to leverage 100:1 or even 500:1 and while stock market close at 4pm, FX trading is 24/7. The only ones who can make consistent money are those with insider information. The big banks and their currency trading arms with ties to central banks. Otherwise, you either get real lucky and win big and never trade FX again or you will get whittled down until you lose everything or you hit a bad spot and lose everything in a second. I know people who went into FX trading and they couldn't leave their homes because they were monitoring pips. It became an obsession and they all eventually gave up after losing money. But if you are lucky and at the right place at the right time, you would retire in a few seconds. Like the swiss franc move a few years ago. If you were lucky or "well-informed" and bet the right side, that huge move could have turned your thousands into millions. But those kinds of moves are rare and unexpected.
- sireat 9y ago
  Another problem is that if you are doing your trading/speculation in the modern "bucket shops" you run into the very same problem Jesse Livermore had in the 1890s, you get banned from the premises and your profits taken away. There are hundreds of stories of people actually getting lucky/good in modern FX bucket shops and not getting all of the money.

kloncks 9y ago

Just out of curiosity, what's the Bitcoin exchange you reference?

patio11 9y ago
You can satisfy your curiosity trivially by looking for cross-currency Bitcoin volume stats and looking for the JPY volume. This will avoid me having made directly critical remarks of a Tokyo startup; that is, for a few reasons, something I am careful about doing.
- 101km 9y ago
  Apropos of nothing one could look up exchanges ordered by Bitcoin USD volume here: https://www.cryptocompare.com/coins/btc/analysis/USD https://www.cryptocompare.com/coins/btc/analysis/USD
  - unkown-unknowns 9y ago
    Hey look at this video I happened to find which has nothing to do with what has been said by others ITT: https://youtu.be/ODhv4VoMssk https://youtu.be/ODhv4VoMssk
    - Danieru 9y ago
      Also not on topic, but just an hour ago on prime time Japanese TV there was a Bitcoin ad. It appears some Tokyo based btc exchange is generous enough to run ads for the good will of informing regular people of how btc is the future of money.
- modeless 9y ago
  I am interested to know the reasons why you avoid making directly critical remarks of Tokyo startups.
  - patio11 9y ago
    Some combination of "I am an optimistic guy and like seeing the good in everyone", "This is, like Silicon Valley, a very small town where everyone knows everyone and where making friends is higher expected value than making enemies", "There exist people / organizations I care about which gain or lose karma in proportion to myself and I feel responsibility to not damage their interests", and "I can be trivially deported."

will_brown 9y ago

>She doesn't actually own dollars at any point; she is just "trading" with you. How is that different than trading oil; gold or public stock? If you have ever traded any of those, I'd be willing to wager or invest that if you have, you never took possession of and never really owned barrels of oil; gold bars or even actual stock certificates. You are most likely to have actually owned stock, but when you get into the real nitty gritty of litigation, you would be very surprised (or not, but many would) how stock trading and ownership actually work.

cm2187 9y ago
You usually trade futures on commodities, not the commodities themselves. Unless you let it expires and the other side chooses a physical settlement! On stock, you actually own the stock, through your broker.
- will_brown 9y ago
  >On stock, you actually own the stock, through your broker. I am fairly certain nowadays Cede & Company owns 100% of all the stock in all US markets (NASDAQ, NYSE, etc...). But if you believe you own stock that is exactly the type of confusion and uncertainty the markets themselves want the public to believe, at least according to the litigation I am familiar with, but don't take my word, familiarize yourself with the Depository Trust Company (DTC) and Cede and come to your own conclusions about stock ownership.
  - barrkel 9y ago
    You're factually correct about physical tokens, but it's not what the system is built on - that's contracts.
    - will_brown 9y ago
      I'm not sure what you mean by physical tokens, but the rest sounds about right. And they can downvote me all they want, as you say I am factually correct, because factually Cede literally and technically owns the stock and everyone else just has varying degrees of contractual rights, but most importantly in no way could that lead to physical possession or even technical ownership of the stock from Cede. And I will not even go down the rabbit hole of contractual rights, but obviously includes legitimate ideas of economic interest and voting rights, but as the comment above noted about brokers, that is were things get very interesting, because then often times people don't even own contractual rights, or alternatively many party's simultaneously have varying degrees of contractual rights over the same stock (often times leading to factual inconsistencies and legal impossibilities).

hkmurakami 9y ago

It always amazes me (read: horrifies me) that companies are allowed to plaster FX ads in a deceptively playful and game-like way inside rail cars.

omarforgotpwd 9y ago

The line between gambling and investment gets blurrier the more you think about it. A gamble is really just a really poor / risky investment when you get down to it.

icelancer 9y ago
>>A gamble is really just a really poor / risky investment when you get down to it. I counted cards and did other advantage gambling. They were not poor investments or any more risky than other investment ventures (in fact, significantly less risky in some areas I specialized in). But it was never investing. It was always gambling.
- empath75 9y ago
  I think that the difference between investing and gambling is that in investing there is at least notionally a capitalistic enterprise like a corporation being invested in.
  - icelancer 9y ago
    >>I think that the difference between investing and gambling is that in investing there is at least notionally a capitalistic enterprise like a corporation being invested in. FX/FOREX investments or futures/commodities trading don't count?
    - empath75 9y ago
      I wouldn't considers those investments as much as I'd consider them savings or hedges. If I buy dollars and put them under my mattress, that's not an investment. I'm not sure why it suddenly becomes an investment if I buy euros and do the same thing.
      - omarforgotpwd 9y ago
        If you’re holding the dollars because you think they’ll appreciate then it is kind of an investment. Same with euros. Dollars are printed by the federal reserve but if you think about it they’re really securities like any other. It just so happens that this particular security is widely accepted to cover debts in the United States, hence its value. Holding dollars is a bet on the United States. If you thought the US was going to collapse you’d certainly try and hold less dollars.

eterm 9y ago

That's interesting because in the UK spread betting on FX is regulated as gambling. People actually prefer it this way because investments are taxable income but gambling winnings are not (and gambling is of course legal here). So you get almost the opposite situation, where spread betting is dressing itself up as financial trading not to deceive the regulators but as a way for people to invest in a more tax friendly manner.

dalbasal 9y ago
It’s all a response to the legal status of investments and gambling (both have different categories with different rules). Whether something is really gambling or investment is kind of philosophical. UK regulators tend to use different terms, specifying subcategories. UK gambling regulations allow anyone old enough to gamble on these exchanges under the same rules as sports betting. If this was classified as financial services, regulations would be a lot stricter. Anyway, UK gambling winnings are not taxable for consumers. The casino’s cut is taxable (15% of gross), which is transferred directly to the customer via spreads whether they win or lose.

0xcde4c3db 9y ago

> The only purpose of the exchange rate is to be a source of legal random numbers, since a die or deck of cards would be a source of illegal random numbers. Incidentally, Illegal lotteries in the US historically used similar sources of numbers. In their case it was apparently more of a way to guarantee that the drawing wasn't fixed than to present it as legal. [1] [1] https://en.wikipedia.org/wiki/Numbers_game#Gameplay https://en.wikipedia.org/wiki/Numbers_game#Gameplay

aerovistae 9y ago

I don't think FX trading is immoral...

eighthnate 9y ago

> so, you give them "investment" options like "Is the yen going to trade up against the dollar?" Even worse( or better depending on your perspective ), these "investments" allow you to leverage 100:1 or even 500:1 and while stock market close at 4pm, FX trading is 24/7. The only ones who can make consistent money are those with insider information. The big banks and their currency trading arms with ties to central banks. Otherwise, you either get real lucky and win big and never trade FX again or you will get whittled down until you lose everything or you hit a bad spot and lose everything in a second. I know people who went into FX trading and they couldn't leave their homes because they were monitoring pips. It became an obsession and they all eventually gave up after losing money. But if you are lucky and at the right place at the right time, you would retire in a few seconds. Like the swiss franc move a few years ago. If you were lucky or "well-informed" and bet the right side, that huge move could have turned your thousands into millions. But those kinds of moves are rare and unexpected.

sireat 9y ago
Another problem is that if you are doing your trading/speculation in the modern "bucket shops" you run into the very same problem Jesse Livermore had in the 1890s, you get banned from the premises and your profits taken away. There are hundreds of stories of people actually getting lucky/good in modern FX bucket shops and not getting all of the money.