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>Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinba

by jasode 4y ago

>Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinbase needs as many people as CME. Coinbase isn't a direct comparable to CME because CME only does the exchange function. Coinbase combines several different types of financial institutions in the crypto space: + exchange : order matching engine of buy & sell -- analogous to NYSE/NASDAQ/CME + broker : custodian of customers' margin accounts -- like Schwab, Vanguard, Fidelity, etc + bank : digital wallet and loans with customers' crypto as collateral -- like JP Morgan, Bank of America + ecommerce payments : analogous to PayPal/VISA/MC Even though CME deals with trading corn commodities, it is not a bank for people to use corn as collateral. Therefore a corn farmer can't go to the CME and get a loan and pay it back when he sells his crop harvest. Regardless of all the various financial areas they're in, Coinbase got overstaffed (like many other tech companies overhired) and so they're making aggressive cuts.

vgatherps 4y ago
On the other hand, the regulatory requirements on CME are FAR greater and the requirements on their exchange technology are drastically greater as well. CME also has to build risk and margining technology since its customers are generally managing complex derivatives portfolios and CME has to understand what risk those portfolios have under all sorts of tail market events.
tptacek 4y ago
CME isn't just "corn commodities"; they're CME, CBOT, NYMEX and COMEX, and they're a clearinghouse, they operate an electronic trading system, they're a colo provider, and a minter of new derivative products like S&P futures and SOFR. I'm sure I'm missing a bunch of other things. They probably have much more code than Coinbase. It's not all code you'd want to work on, but, from passing experience, there is a lot of it.
- jasode 4y ago
  >CME isn't just "corn commodities"; Yes, I understand that and I wasn't dismissing CME as a simple platform. I used to work across the street from the CME and saw the traders walking around in their yellow jackets every day. The "corn" was only one example to tie it to a bank services scenario. >, and a minter of new derivative products like S&P futures I think Coinbase recently offered something similar: https://www.google.com/search?q=Coinbase+launches+Derivatives+Futures+Products https://www.google.com/search?q=Coinbase+launches+Derivative... Somehow, the wordsmithing in my comment got misconstrued as being dismissive of CME as being too simple and praising Coinbase as being complex.
  - tptacek 4y ago
    It's not that it's dismissive (though the corn thing was a bit much) so much as that it's probably wrong. CME is mostly a tech company, and they do a lot of stuff.
    - jasode 4y ago
      >(though the corn thing was a bit much) so much as that it's probably wrong. I was trying to convey that a farmer can't get a loan from the CME to finance his seeds/fertilizer/etc and use his corn crops as collateral. What is factually incorrect about that? Coinbase and CME have obvious overlaps, but they also have massive financial functions where they don't. That's what the corn bank loan example was trying to highlight. EDIT to reply: >The assertion is that Coinbase has more work to do and thus more need for headcount than CME. I dispute that. Sorry for the misunderstanding! I never intended to convince people that Coinbase needs more employees than CME. I should have put a disclaimer in my original comment such as "Coinbase may only need 1/10th the number of CME employees but as fyi, Coinbase is not a direct comparable to CME..."
      - tptacek 4y ago
        The assertion is that Coinbase has more work to do and thus more need for headcount than CME. I dispute that. That's all.
- ycombobreaker 4y ago
  The "colo provider" role is just rent collection from HFT customers. It's 100% derived from their exchange business. It's an interesting idea, but don't think you can segregate their exchange role from their authorship or standardization of financial instruments. Any exchange is either creating products to trade or licensing them. Any commodity exchange is naturally interested in setting contract standards related to delivery and quality. They are an exchange, through and through. Everything else is a side project in support of that one role.
  - tptacek 4y ago
    It is indeed 100% derived from their exchange business. It is also a colo operation. I'm not making a moral argument, but rather a practical one.
boring_twenties 4y ago
Coinbase doesn't offer margin.
sobkas 4y ago
> >Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinbase needs as many people as CME. > Coinbase isn't a direct comparable to CME because CME only does the exchange function. > Coinbase combines several different types of financial institutions in the crypto space: > + exchange : order matching engine of buy & sell -- analogous to NYSE/NASDAQ/CME > + broker : custodian of customers' margin accounts -- like Schwab, Vanguard, Fidelity, etc > + bank : digital wallet and loans with customers' crypto as collateral -- like JP Morgan, Bank of America > + ecommerce payments : analogous to PayPal/VISA/MC > Even though CME deals with trading corn commodities, it is not a bank for people to use corn as collateral. Therefore a corn farmer can't go to the CME and get a loan and pay it back when he sells his crop harvest. > Regardless of all the various financial areas they're in, Coinbase got overstaffed (like many other tech companies overhired) and so they're making aggressive cuts. So maybe Coinbase should only keep profitable parts and cut/restructure/sell parts that aren't, instead of burning all their revenue in hope of capturing the market?

by jasode 4y ago

vgatherps 4y ago

On the other hand, the regulatory requirements on CME are FAR greater and the requirements on their exchange technology are drastically greater as well. CME also has to build risk and margining technology since its customers are generally managing complex derivatives portfolios and CME has to understand what risk those portfolios have under all sorts of tail market events.

tptacek 4y ago

CME isn't just "corn commodities"; they're CME, CBOT, NYMEX and COMEX, and they're a clearinghouse, they operate an electronic trading system, they're a colo provider, and a minter of new derivative products like S&P futures and SOFR. I'm sure I'm missing a bunch of other things. They probably have much more code than Coinbase. It's not all code you'd want to work on, but, from passing experience, there is a lot of it.

jasode 4y ago
>CME isn't just "corn commodities"; Yes, I understand that and I wasn't dismissing CME as a simple platform. I used to work across the street from the CME and saw the traders walking around in their yellow jackets every day. The "corn" was only one example to tie it to a bank services scenario. >, and a minter of new derivative products like S&P futures I think Coinbase recently offered something similar: https://www.google.com/search?q=Coinbase+launches+Derivatives+Futures+Products https://www.google.com/search?q=Coinbase+launches+Derivative... Somehow, the wordsmithing in my comment got misconstrued as being dismissive of CME as being too simple and praising Coinbase as being complex.
- tptacek 4y ago
  It's not that it's dismissive (though the corn thing was a bit much) so much as that it's probably wrong. CME is mostly a tech company, and they do a lot of stuff.
  - jasode 4y ago
    >(though the corn thing was a bit much) so much as that it's probably wrong. I was trying to convey that a farmer can't get a loan from the CME to finance his seeds/fertilizer/etc and use his corn crops as collateral. What is factually incorrect about that? Coinbase and CME have obvious overlaps, but they also have massive financial functions where they don't. That's what the corn bank loan example was trying to highlight. EDIT to reply: >The assertion is that Coinbase has more work to do and thus more need for headcount than CME. I dispute that. Sorry for the misunderstanding! I never intended to convince people that Coinbase needs more employees than CME. I should have put a disclaimer in my original comment such as "Coinbase may only need 1/10th the number of CME employees but as fyi, Coinbase is not a direct comparable to CME..."
    - tptacek 4y ago
      The assertion is that Coinbase has more work to do and thus more need for headcount than CME. I dispute that. That's all.
ycombobreaker 4y ago
The "colo provider" role is just rent collection from HFT customers. It's 100% derived from their exchange business. It's an interesting idea, but don't think you can segregate their exchange role from their authorship or standardization of financial instruments. Any exchange is either creating products to trade or licensing them. Any commodity exchange is naturally interested in setting contract standards related to delivery and quality. They are an exchange, through and through. Everything else is a side project in support of that one role.
- tptacek 4y ago
  It is indeed 100% derived from their exchange business. It is also a colo operation. I'm not making a moral argument, but rather a practical one.

boring_twenties 4y ago

Coinbase doesn't offer margin.

sobkas 4y ago

> >Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinbase needs as many people as CME. > Coinbase isn't a direct comparable to CME because CME only does the exchange function. > Coinbase combines several different types of financial institutions in the crypto space: > + exchange : order matching engine of buy & sell -- analogous to NYSE/NASDAQ/CME > + broker : custodian of customers' margin accounts -- like Schwab, Vanguard, Fidelity, etc > + bank : digital wallet and loans with customers' crypto as collateral -- like JP Morgan, Bank of America > + ecommerce payments : analogous to PayPal/VISA/MC > Even though CME deals with trading corn commodities, it is not a bank for people to use corn as collateral. Therefore a corn farmer can't go to the CME and get a loan and pay it back when he sells his crop harvest. > Regardless of all the various financial areas they're in, Coinbase got overstaffed (like many other tech companies overhired) and so they're making aggressive cuts. So maybe Coinbase should only keep profitable parts and cut/restructure/sell parts that aren't, instead of burning all their revenue in hope of capturing the market?