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> If the "20% volume" is from these necessary activities, it's not so concerning, and (for example) forcing them to use someone else's market for these activiti

> If the "20% volume" is from these necessary activities, it's not so concerning, and (for example) forcing them to use someone else's market for these activities would be silly. I don't agree, if they need to hedge spot for their index there is huge value in being the one that operates the venue. The activity is trading crypto and there is always an incentive to do this at the best price (doesn't matter whether you are providing liquidity, or hedging some exposure). Right now we can only assume they do this "the fair way" (eg. how we can trade on their platform - with the same information we have). But how do we know they are? For all we know the guy that needs to execute these trades is sitting next to another guy that is monitoring the exchange and everyone's stops / margin liquidation prices.

gojomo 8y ago
As an extremely-low-frequency user of Coinbase's services, I personally wouldn't really care if, when they make necessary crypto trades to liquidate commissions or maintain requested customer/index-fund holdings, they used their proprietary position to get a slightly-better deal. They have to make their profits somehow. And, the ultimate check on their profits is competitive offerings. Thus a slight profit here may just help them charge less elsewhere, in the fees I explicitly pay. (I can see how a professional or high-frequency trader would feel differently, though.) But, a further clarification from Coinbase has confirmed my skepticism of the nefarious interpretation of the "20% volume" statistic. The 20% figure s driven by trades at the direction of of customers, not for Coinbase itself. See: https://blog.coinbase.com/correcting-the-record-coinbase-does-not-engage-in-proprietary-trading-97e66145af6e https://blog.coinbase.com/correcting-the-record-coinbase-doe...
- captain_perl 8y ago
  There's a million ways for a crooked exchange to fleece clients, but front-running is the most obvious and profitable way. If you're evaluating Coinbase, then start there.

gojomo 8y ago

As an extremely-low-frequency user of Coinbase's services, I personally wouldn't really care if, when they make necessary crypto trades to liquidate commissions or maintain requested customer/index-fund holdings, they used their proprietary position to get a slightly-better deal. They have to make their profits somehow. And, the ultimate check on their profits is competitive offerings. Thus a slight profit here may just help them charge less elsewhere, in the fees I explicitly pay. (I can see how a professional or high-frequency trader would feel differently, though.) But, a further clarification from Coinbase has confirmed my skepticism of the nefarious interpretation of the "20% volume" statistic. The 20% figure s driven by trades at the direction of of customers, not for Coinbase itself. See: https://blog.coinbase.com/correcting-the-record-coinbase-does-not-engage-in-proprietary-trading-97e66145af6e https://blog.coinbase.com/correcting-the-record-coinbase-doe...

captain_perl 8y ago
There's a million ways for a crooked exchange to fleece clients, but front-running is the most obvious and profitable way. If you're evaluating Coinbase, then start there.